It should be time for celebration on Wall Street. A bullish gold cross is on the verge of materialization in the 122-year-old Dow Jones Industrial Average, which comes after an anxiety-producing dip more than two months ago.
However, the formation, which is largely regarded as an optimistic signal, comes in the midst of a stream of market indicators suggesting that stocks are not completely primed to explode significantly higher and may even break down.
Starting Thursday, Dow became
50-day moving average was 24,736.36, while the meter's 200-day moving average was 25,1[ads1]25.81, the FactSet data show. At today's level, the short-term average is about 390 points, or about 1.6%, cross-over cards over the long-term average.
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Many technicians believe that when the 50-day average crosses the long-term 200-day line, this relatively rare event shows the point where a shorter term rebound morphs into a long-term behavior.
A death-cross, where the 50-day fall falls during the 200 days, forms a bearish map pattern, occurred back in December, with the downturn culminating in the broader US stock market, which has the worst trading day before Christmas ever.
Since then, Dow has been on the rise and gained 16.9% since the Christmas Eve nadir, while the S&P 500 index
has climbed 16.9% and Nasdaq Composite
has rallied 20% over the period.
More recently, however, the path for least resistance to stocks has been lower, including in increasing fears that recent policy fluctuations by central banks in Europe and the US may further mark cracks that are already appearing in the world economy.
On Thursday, the European Central Bank announced plans to distribute additional stimulus, raise fresh concerns for the health of the euro area, with Italy in recession and Germany's economy under pressure. The ECB's move comes weeks after the Federal Reserve, with reference to concerns over economic contraction abroad, halted the growth initiative.
The Fed decision had basically given investors reason to push the stocks upwards because it had signaled some that decision makers were responsive to signs of tightening economic conditions and weak growth that could have an impact on the domestic market. However, the convergence of deafness from global central banks can destroy the confidence that the US investment climate will remain favorable.
In fact, Dow and S & P 500 have fallen in seven of the last eight sessions, including Thursday's retreat. And the Dow Jones Transport Average
often used as a barometer for the health of the American economy, hacked its longest losing strip in a decade, on 10 consecutive sessions, on Thursday close February 23, 2009, according to FactSet data.
For the Golden Cross, John Kosar, Marketing Director at Asbury Research, told MarketWatch that the gold cross is a good indicator of signaling to investors what has already happened, but is not as predictive on short and close terms.
"Crucifixion and golden intersections for me are like a weaponry that crosses the wake of a flight carrier," said technical analyst. In other words, when one of these patterns forms, they cannot be useful as guidance in the future. "There are two big boats that take a long time to make a turn [and] it's very late when they cross," Kosar said.
Kosar said he looks at the S & P 500's inability to hold a psychologically significant level of 2,800. After completing this level on March 1 for the first time in months, the broad market stock has stumbled – a potentially unfortunate sign, according to the Asbury analyst. He said the key level to see now is 2,750, not to keep up with what might possibly lead to further sales and pushing of shares at 2.675.
"I can see that we are starting to enter a golden cross [on the Dow]and this kind of tells me more about momentum than what happens about what is going to happen this week or next week," he says. 19659002] Katie Stockton, technical expert and founder of Fairlead Strategies, took it a step further and added that she believes that despite the gains that stocks have had over the last two or three months, they remain in a downtrend. " "She said to MarketWatch," is still quite high. "Stockton said that intermediate market volatility also makes it challenging to determine if stocks are in a bottom-up process, where a lower low – lower than December 24, that is,
A positive indicator for Stockton would arise if the market falls, but remains above that Christmas Eve low.
She relies on CNN's Fear & Greed index as a further tool showing that Wall Street may be receptive to further downdraft one, ranging from 0 to 100, with readings below 50 pointing to more fear than greed, shows a reading of about 59; it was 72 last week. Stockton said she was using it as a counter-measure that could signal short to intermediate overbought or oversold market conditions.
For Dow, Friday's job report could be an important point for Wall Street.
"It may be a decision point for the market," Kosar said.
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