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Monday, January 30, 2012

Golden Cross or Golden Trap in S&P500

CNBS analyst are hyping too much about golden cross in US stock market. Is it really a golden cross or Golden trap for the big investor to catch small investor.

Golden cross - A crossover involving a security's short-term moving average (such as 15-day moving average) breaking above its long-term moving average (such as 50-day moving average) or resistance level.

Death Cross - A crossover resulting from a security's long-term moving average (200 MA) breaking above its short-term moving average  (50 MA) or support level.

This moving averages are lag indicator - which means event is logged after event has occurred. If you look at the chart, it shows death cross and Golden cross.

If you look death cross, the stock already fell and then death cross was detected. Similarly, Golden cross happened in March 2011. But if you look after that there wasn't much room left once golden cross happened.

5 Year Golden cross and death cross
The chart says if S&P500 hit 1367 this time, we'll see repeat of Oct -Nov 2008 crash. Its not golden cross but a golden trap. Right now ECB is keeping market higher with its free money printing press. Tomorrow market is expected to open higher.  Also after 10 EST it would be right time to buy bear stocks again.

But does this mean you should stay away, if your bullish/bearish then play this market on daily basis with stop losses only if you can watch your stocks and remember to sell at the end of the day.

Economic calendar to focus for tomorrow are

08:30 USDEmployment Cost Index (QoQ)0.4%0.3%
08:30 CADRMPI (MoM)0.2%3.8%
08:30 CADGDP (MoM)0.2%0.0%
08:30 CADIPPI (MoM)0.1%0.2%
09:00 USDS&P/CS Home Price Indices Composite - 20 (YoY)-3.2%-3.4%
09:45 USDChicago PMI63.062.5
10:00 USDCB Consumer Confidence68.264.5
11:30 USD4-Week Bill Auction0.020%


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