It should be time to celebrate on Wall Street. A bullish gold cross is about to take shape in the 122-year Dow Jones Industrial Average, after it came over a couple of months ago after a scary slump.
The formation, which is widely regarded as a kick-off signal, is triggered by a flood of market indicators suggesting that stocks are not necessarily prone to explode much higher and could even break even deeper.
From Thursday the Dow's
The 50-day moving average was 24,736.36 while the 200-day moving average of the dial gauge was 25,1
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Many technicians believe that when the 50-day moving average goes over the longer-term 200-day line, this relatively rare event marks the point where a shorter event occurs Rebound is turning into a longer-term uptrend.
A death cross, where the 50-day mark falls below the 200-day mark and forms a bearish chart pattern, took place in December. This downtrend caused the broader US stock market to suffer the worst trading day before Christmas.
Since then, the Dow has been on the rise, gaining 16.9% since Christmas Eve Nadir, while the S & P 500 Index
rose 16.9% and the Nasdaq Composite
has grown by 20% over the period.
More recently, however, the path of least resistance to equities has been lower, amid growing concerns that recent policy increases by central banks in Europe and the US could further highlight the cracks in the global economy.
On On Thursday, the European Central Bank put forward plans to inject additional impetus into new worries over eurozone health, as Italy is in recession and the German economy is under pressure. The ECB's move took place a few weeks after the Federal Reserve closed down the interest rate hike, citing concerns about the economic downturn abroad.
The Fed's decision had initially prompted investors to push the stock higher, signaling some that policymakers were responding to signs of worsening financial conditions and sluggish growth that could be detrimental domestically. However, the convergence of secrecy among global central banks may raise confidence that the US investment climate will remain favorable.
In fact, the Dow and the S & P 500 have fallen in seven of the last eight sessions, including the withdrawal on Thursday. And the Dow Jones Transportation Average
was often used as a barometer for the health of the US economy and recorded its longest defeat in about ten years, at ten consecutive meetings at the close of Thursday, February 23, 2009 according to FactSet.
As for the golden cross, Asbury Research's chief market strategist John Kosar told MarketWatch that the golden cross was a good indicator to signal to investors what had already happened, but it was not so predictive in the short and short term ,
"For me, death crosses and golden crosses are like running after a battleship crossing the wake of an aircraft carrier," said the technical analyst. In other words, at the time of applying one of these patterns, they can not be useful as signposts forward. "These are two big boats that take a long time to make a turn [and] .It's really late when they cross," Kosar said.
Kosar said he sees the failure of the S & P 500 to remain above a psychologically significant 2,800. After peaking above this level for the first time in months on March 1, the broad market benchmark stumbled – a potentially ominous sign, according to Asbury analyst. He said that the most important level that can be seen now is 2,750, but failing to hold it may result in stocks continuing to sell and stocks rising to 2,675.
"I see that we are starting to reach a golden cross. [on the Dow] and that tells me more about momentum than about what's going to happen this week or next, "he said.
Katie Stockton, Technical Expert and Founder of Fairlead Strategies, went one step further, adding that despite the gains in equities, she has seen a downtrend in the last two or three months. "The risk," she told MarketWatch, "is still pretty high."
Stockton said the market's medium volatility also makes it difficult to figure out if stocks are in a low-lows process, where the lows are lower than December 24, Nadir, that is – could result.
A positive indicator for Stockton would come when the market falls, but remains above the Christmas low.
It relies on CNN's Fear & Greed index as another tool that shows that Wall Street may be vulnerable to another downtrend. This index, which ranges from 0 to 100 and readings below 50 indicate more anxiety than greed, shows a value of about 59; It was 72 at last week. Stockton said it is using it as an opposite measure that could signal short- to medium-term overbought or oversold conditions in the marketplace.
As for the Dow, the job report for Friday could be an important point for Wall Street.
"It could be a decision-making point for the market," Kosar said.
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