FLASH: The DJIA triggered a technical signal Tuesday that many participants believe could mean more gains for stocks, the pattern is known as the ‘golden cross‘.
The chart pattern comes about when a short-term moving average moves above a longer-term moving average. Moving averages are popular trend indicators used by technical analysts.
In the case of the DJIA Tuesday, the 50-Day MA crossed above the index’s 200-Day MA, which is the most widely watched combination among technicians.
Some analysts employ additional criteria in determining whether a cross is triggered, for example, if both moving averages are trending North, which the DJIA’s currently are.
Even with the Dow’s slightly lower close Tuesday on trade concerns, the 50-Day MA managed to end the session above the 200-Day MA.
Other major indexes, such as the S&P 500 and NAS Comp, have moved closer to a golden cross as stocks continue to rally off their 26 December lows, buoyed by a Fed pause in interest rate hikes and building investor optimism for a trade deal between the US and China.
The golden cross should not be looked at in a vacuum; gains in the S&P 500 and NAS Comp that have lifted those indexes above their highs from early March as further evidence the market is strengthening.
HeffX-LTN’s overall technical analysis of the major US stock market indexes is Bullish in here.