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MV Weather Report: Does Golden Cross Mean Stormy Skies Ahead?


Rain or shine, we review the day's biggest stock stories.

The golden cross in the S&P 500 has the market's full attention. A golden cross occurs when the 50-DMA crosses over the 200-DMA. This is a bullish pattern that's signaled market lows in the past.

Click to enlarge

Some technical analysts, including Professor Jeff Cooper, have started comparing this cross to the one that occurred in 2003:

"As shown in a chart of the S&P from my morning report, there's a distinct difference between the cross then and what's occurred with the current cross: In 2003, the 50-day moving average crossed a rising 200-day moving average.

Click to enlarge

"Moreover, note that, prior to the cross, the S&P had tagged its 200-day moving average, then proceeded to back-test its 50-day moving average. This is a pertinent concept, as the first tag of the 200-day moving average in a long period almost always defines a period of pullback/consolidation or marks a rollover and a new leg down in a bear market. The last kiss of the overhead moving average by the S&P occurred in May 2008."

As for today's market, it was a mixed, and very slow, session. I'd actually expect this week to be very slow in general, thanks to the holiday. The S&P 500 closed at the high of the day, up by 8 points, to 927. If you missed it, be sure to read Prof. Smita Sadana's piece Why the Golden Cross May Not Be Golden.

The biggest winners were the defense names: General Dynamics (GD), Lockheed Martin (LMT), and United Technology (UTX). The banks were also strong for the session: Bank of America (BAC), Wells Fargo (WFC), and JPMorgan (JPM).F our losers that stuck out to me were the master betas (as Toddo likes to call them): Amazon (AMZN), Research In Motion (RIMM), Baidu (BIDU), and Apple (AAPL).

Tomorrow will be a special Turnaround Tuesday, as it's also the last day of the quarter-- is window-dressing too easy? Traders will be watching for the consumer confidence numbers and the S&P Case-Shiller Home Price Index at 9:00 a.m.; the Chicago PMI will follow at 9:45 a.m.

Have a great night!
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No positions in stocks mentioned.

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