Stocktake: A golden cross for stocks
Technical indicator has a strong record of intermediate-term returns tending to be better than normal
Outside the New York Stock Exchange. Photograph: Angela Weiss/AFP via Getty Images
The S&P 500 completed a so-called golden cross last week, with its 50-day moving average crossing above its longer-term 200-day average. Should investors care?
Technicians view such moves as confirmation of a change in market trend.
Sceptics might note data doesn’t support fears regarding the death cross, this indicator’s bearish equivalent. Indeed, the S&P 500 soared after March 30th’s death cross, so it’s clear these are imperfect signals.
That said, the golden cross has a strong record in recent decades, with intermediate-term returns tending to be better than normal.
That aside, investors must surely be relieved such a conversation is even taking place; after markets collapsed in March, you’d have gotten very long odds that stocks would again be marching higher within such a short space of time.