The Golden Cross

June 18th, 2009 6:52 pm mylifemytrade Leave a comment Go to comments

Most recently, you must have heard a lot of chatter about the Golden Cross. What in the world is Golden Cross?

Well, Golden Cross happens when 200dma crosses the 50dma which is moving up. Occurance of this is being touted as a very bullish event. There may in fact be some truth to the fact that this Golden Cross does trigger some buying by hedge funds and mutual fund managers.

However, before we even get to debating if Golden Cross is something of significance or not, we first have to settle whether to use “simple moving averages” OR “exponential moving averages”. While doing search on the internet, I found this article that illustrates that historically trading the Golden Cross of SMAs has outperformed trading the Golden Cross of EMAs.

In any case, whether or not you are a believer, it is worth while to see where the major indices are w.r.t. Golden Cross. And please… don’t forget to share some love :-)

UPDATE Jun 19, 2009: The Golden Cross on RUT did materialize today. I don’t see anything happen today because of it. The only thing different today is that it has started raining again.. but I won’t credit the Golden Cross with that because rain is supposed to be the norm in Seattle :-)

2009-06-18-spx-golden-cross

2009-06-18-ndx-golden-cross

2009-06-18-russell-golden-cross

2009-06-18-dow-golden-cross

Categories: Misc Tags: , , ,


  • mtst
    Shared some love.

    Golden Cross in this case could be a "relative" event since, if you compare with previous ones, 200SMA was correcting is angle, now the GC will be made with a downtrending one.
    JMV

    Cheers
  • enoeht
    Good stuff - thanks. I am following the Golden X on the SNP. Seeing a mixed picture here - consolidation, OPEX, rotation etc. But am convinced that the worst is behind us in the economy.
  • matsou
    Thanks!
  • Get an avatar dude
  • I've been buying on the dips ( following the rotations) , like there's gonna be one more leg up.
  • How far do you see SPX go up in this leg? I think we are headed down from here.. All that is needed is a trigger event. In Feb, it was Geithner unveiling the bank plan. I don't know what it will be. At the same time, I don't think we are headed to March lows. We have one more big leg up to SPX 1150 or so before we turn down to test March lows.
  • I think the $RUT is a permanent short at 535-539. 520 is the middle bb band, that's where I'd try my next short on the $RUT. I don't know how long this market can trade sideways, without eventually breaking to the down side.
    I'm using TWM, OCT 35 calls as my guide.( sort of a mental note ) ...If I see that at 8.20 - 9.00 again, I'm shorting everything.
  • You were talking about a leg up ... now you are talking sideways... LOL .... Z please don't confuse me :-)
  • I'm just trying to stay nimble---There's two camps out there--One says sideways, one says leg higher. I don't see any new highs on stocks, so I think I'm in camp 3.
    Camp 3***
    This market may have already topped at $RUT 535 / $INDU 8877
    short $RUTat 520, but use a 525 stop. If I'm stopped out, ( there goes Camp 3 theory)
  • woewoe
    yes, get an avatar;)
  • You respond to the wrong message.. Click reply right next to the message that you want to respond to.. zstock already has an avatar - LOL
  • matsou
    lol... got one
  • Nice one - thanks.. On disqus discussion boards, at least in trading community, person without an avatar is regarded as a troll and is not responded to.
  • RIMM after hours last 76.05
    http://www.nasdaq.com/aspxcontent/ExtendedTradi...
    or down 50 cents in AH
  • Indeed it recovered most of its AH losses in AH itself - LOL ... Check out http://www.mylifemytrade.com/2009/06/rimm-yo-yo...

    It beat the earnings estimates, but poor guidance.. I am guessing that the CEO worked up some magic in the conference call which brought the stock back up-to breakeven. Looking at the futures so far, it seems that it might even try a run towards $80 strike.

    RIMM might be a good candidate to sell premium on tomorrow morning if one can guess which way the broader market is going to go.
  • New thread--
    If you look at BAC and JPM. It's been a long time since I've seen that narrow of a range on financial stocks for this length of time. The last time I saw that was around Apr, MAY 2008 and it finally ended up breaking to the down side.
  • Z, to be honest.. I think they are behaving normally finally. They were never supposed to be like the AAPLs and the RIMMs... the 2-beta and 3-beta stocks.. They were always supposed to sport small P/E multiples and trade in sync with the broader indices. I too was deceived since beginning of May that they are trading in a narrow range.. But there are two things that create that illusion:
    - After massive volatility in financial stocks last year, we got used to seeing them move 5% up or 5% down even when the market was moving just 1% up or down
    - If you look at the 6-month chart, a logarithmic one.. it shows prices ranging from a few bucks ($3 for BAC) all the way up to $15.. so, if you look at the current price range, it seems quite dwarfed in a log scale graph.

    And finally, the financials had a HUGE run-up from March lows... most of them doubled or tripled from the Jan/Mar lows. So, all that is happening since XLF hitting $13 is sector rotation.

    I do see some downside - 5% or may be even 10%.. but I really don't see XLF dip below 10.4 or so in any circumstance.
  • dullmind
    So I guess I should ignore FAZ/FAS and focus on other 3x ETF's?
  • Almost all 3x ETFs are mainly meant to be day-trade vehicles.. Best to trade those 3x whose underlying you have been following for a while.

    For day trade, I understand that it is important to understand the nuances of how the price moves... I will give you an example: Even on a VERY RED DAY, OIH will typically open almost unchanged and then within 5 minutes take a dump... You would expect that on a VERY RED DAY i.e. BIG GAP DOWN, individual stocks would gap down too... but not so with OIH..

    See today's OIH: http://screencast.com/t/UqGjl8RErqU

    So, essentially FAS/FAZ if you understand how RIFIN or XLF move.. Trade ERY/ERX if you have a good understanding of how the RIENG moves.
  • dullmind
    Never heard of RIENG, some searching shows its the
    Russell 1000 Energy (RGS) Index. Symobl "RIENG.X" on Google
    finance, "$RIENG" on StockCharts.com and "$R1ENE.X" on
    TD Ameritrade, aggggg!. All closed at 538.89 Monday Jun 22, is that
    the one you mean? I have never followed, it, will begin, thanks for
    the idea.
    PS. ERX = Direxion Daily Energy Bull 3X Shrs
    ERY = Direxion Daily Energy Bear 3X Shrs, yes?
  • I would like to clarify that I was not suggesting that you do ERY/ERX and not FAS/FAZ.

    I merely used RIENG as an example.. because that is what I remembered from top of my head.. All I am saying is

    - if day trading a security, you got to be aware of the characteristic intra-day movement patterns for that security
    - if trading leveraged ETF, then what you need to look at is the underlying index
  • dullmind
    Thanks for your reply, I need to 'free my mind' of its FAZtastic
    obsession as I hope your right and the banks quit jumping around.
    For one thing failing banks may mean my bear ETF gains could
    vanish along with a bank, that would be bad. I NEVER take a trade
    with doing some due diligence, perhaps not enough, but some.
    Some simple charting I have already done indicates that ERY/ERX
    is probably where I should be paying more attention, and let go of
    my FAZ disease. I really appreciate the time you have taken to
    reply to my reply's. No money yet in ERY/ERX need to learn its
    behavior, BEFORE I put real money at stake.
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