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A Golden Cross -- or a Crash?


Prevent both miracles and nightmares from destroying your portfolio.

As usual, the market provides a variety of signals, allowing investors to hop onto a bandwagon, believing they know what's in store for the stock markets of the world.

Recently, the NASDAQ gave a bullish signal, known as the Golden Cross -- when the 50-day moving average (DMA) crossed the 200-DMA to the upside -- which is supposed to be a bullish sign.

On the other hand, there are those who compare today's market with that of the Depression Era, in which a large market decline was followed by a substantial rally -- then a sink to new lows. I don't want to publicize this opinion, but one prognosticator is looking for the Dow Jones Industrial Average to move below 3,000.

We know they can't all be correct, but the bulls and bears can go merrily on their way, each with "evidence" to support their dreams. The message I take from this is that it's possible that one of these views will prevail, but I have no idea which is more likely (okay, I have an opinion, but won't wager on its coming true). So it just encourages me to trade with a neutral bias.

However, I plan to continue to own enough insurance so that, if we do see a significant rally or debacle, I'll survive in good shape. I have no plan to bet on a long shot, and thus won't load up on cheap OTM options hoping for a miracle. I'll settle for being prepared to prevent such a miracle -- or nightmare -- from demolishing my account.

How will you position yourself?

No positions in stocks mentioned.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

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