S&P 500 Forms "Golden Cross": Are Stocks Set to Explode Higher?

Home > Stocks
S&P 500 Forms "Golden Cross": Are Stocks Set to Explode Higher?
Moving averages are lagging technical indicators.

By Bob Stokes
Wed, 01 Feb 2012 15:15:00 ET

Get investable insights sent to your inbox at least once a week – for free. Challenge the way you think about investing with The EWI Independent.

Privacy

The S&P 500 just concluded its best January since 1997, with a 4.4 percent gain.

That gain has market observers talking about the January Effect in stocks, namely that "as January goes so goes the year."

But there's another hot topic regarding the S&P 500, called the "Golden Cross." That's when the 50-day moving average moves above the 200-day moving average, which is supposed to be a bullish signal.

On January 31, the "Golden Cross" did form on the S&P 500 chart. Even though the S&P 500 closed the day in slightly negative territory, the index's 50-day remained above the 200-day.

What's our view of moving averages as a forecasting tool?

"We don't use moving averages to forecast waves since they naturally lag the market, but since major-moneyed investors do watch them, we should be aware of their position relative to prices."

Short Term Update, Dec. 23

As for what we do follow, the bedrock foundations for market analysis and forecasting are patterns, momentum and sentiment.

What are the three revealing now?

Well, let's look at sentiment:

"...since the December 19 low the trend in optimism has been on the ascent (whereby more volume consistently flows into calls than puts), reaching a nine-month extreme in conjunction with the recent stock market highs. In fact, equity-options traders are betting on a continued advance to a greater degree than they did at the April 29/May 2...stock peak (close/intraday)."

Short Term Update, Jan. 27

When everyone crowds on to one side of the boat, they better have on life jackets. It's just a matter of time before they get wet.

Momentum?

Did you know that stock exchange volume has mostly been decreasing since October? It's true. Moreover, volume recently dropped to its lowest level in 4 years.

As you probably know, volume is the fuel which powers sustained rallies.

Allow me to refer you to the latest Short Term Update for the stock market's Elliott wave pattern.

In conjunction with momentum and sentiment, the market's price pattern is telling an attention-riveting story. We can help you get ready for the final chapter. How?

We're offering you a 30-day risk-free look at the Short Term Update, which is published every Monday, Wednesday and Friday (plus additional days when market conditions warrant).

Follow this link to start reading the latest Short Term Update>>

Learn About Near-Term Market Trends and Opportunities!

As you attempt to keep on top of your investment decisions throughout each week or month, a steady flow of proven information can make all the difference. That is what Steve Hochberg's Short Term Update is all about: cutting through the noise so you know what's important and what's not.

Every Monday, Wednesday and Friday (plus interim updates when market action warrants), Steve Hochberg zeros in on his top Elliott wave counts in U.S. stock indexes, gold, silver, bonds and the U.S. dollar, then serves them up to you with the kind of market insight only EWI can provide.

Each issue gives you intensive near-term market forecasts, in-depth analysis and 10+ timely charts that help you identify the market's operative trends and when they might reverse. It empowers you to take control of your investments and anticipate trends that most investors don’t recognize until it’s too late.

Tap into these near-term insights right now via a RISK-FREE subscription to Short Term Update.

Tags: Elliott wave, momentum, sentiment, technical analysis, technical indicators, Traders

May 13-16

Las Vegas Money Show

July 10-13

Freedom Fest Conference

Stay Ahead of the Trend in U.S. Stocks

EWI's Financial Forecast Service equips you to think, trade and invest independently from the crowd. Here's what you'll get, risk-free:

Short Term Update -- Intensive forecasts and analysis 3x/week for U.S. stocks, gold, silver, bonds and the U.S. dollar.
Financial Forecast -- In-depth, intermediate-term perspective on U.S. stocks, gold, silver, bonds and the U.S. dollar.
Theorist -- Bob Prechter's monthly big-picture insights.

Put the Financial Forecast Service on your screen in minutes, risk-free>>

Most Read

Highest Rated

Free Video Course

Learn the Why, What and How of Elliott Wave Analysis

Financial media use news and economic events to explain market moves. Steer clear of this misguided approach. Take part in the Elliott Wave Crash Course to learn what really moves the markets.

The Elliott Wave Principle is a detailed description of how financial markets behave. The description reveals that mass psychology swings from pessimism to optimism and back in a natural sequence, creating specific Elliott wave patterns in price movements. Each pattern has implications regarding the position of the market within its overall progression, past, present and future. The purpose of Elliott Wave International’s market-oriented publications is to outline the progress of markets in terms of the Wave Principle and to educate interested parties in the successful application of the Wave Principle. While a course of conduct regarding investments can be formulated from such application of the Wave Principle, at no time will Elliott Wave International make specific recommendations for any specific person, and at no time may a reader, caller or viewer be justified in inferring that any such advice is intended. Investing carries risk of losses, and trading futures or options is especially risky because these instruments are highly leveraged, and traders can lose more than their initial margin funds. Information provided by Elliott Wave International is expressed in good faith, but it is not guaranteed. The market service that never makes mistakes does not exist. Long-term success trading or investing in the markets demands recognition of the fact that error and uncertainty are part of any effort to assess future probabilities. Please ask your broker or your advisor to explain all risks to you before making any trading and investing decisions.