Market Analytics and Considerations
Some bullish market technical analysts might pick up on at least one sign in spite of concerns about inflation and a possible recession.
The Dow Jones Industrial Average DJIA, -0.90% appears to be building an enthusiastic golden cross more than nine months after a bearish death cross emerged in March when the Federal Reserve’s hawkish policy destroyed Wall Street irrational exuberance.
A golden cross occurs when the asset price’s 50-day moving average trades above the 200-day MA, whereas a death cross occurs when the 50-day moving average trades below the long-term average.
At the time of the last check on Friday afternoon, the Dow’s 50-day moving average was 32,200.32, while the 200-day moving average was 32,460.71. This is a difference of roughly 260 points that, based on its current trajectory, may be crossed in one or two weeks.
According to Dow Jones Market Data, a golden cross would be the Dow industrials’ first since August 2020.
The bullish chart formation would also appear at an odd time for investors, with the stock market showing an apparent uptrend despite the growing possibility of a recession in 2023.
A golden cross can often help put an asset’s move into perspective, but they usually come well in advance.
It’s interesting to note that the recession is also widely predicted, and some people don’t think investors are aware of this. BlackRock says that investors are underestimating the damage that will occur, especially given that earnings expectations for American businesses are too high.
Therefore, investors might benefit from taking any golden crosses in assets with a grain of salt.
The Dow industrials have outperformed the S&P 500 SPX by 2.5% and the Nasdaq Composite COMP by 8.2% over the past three months, respectively. The Dow industrials are currently up about 5%.
The Dow industrials have recently in aggregate over the past three months thanks to advances in shares of Caterpillar CAT, -1.57%, Boeing Co. BA, +0.26%, Merck & Co. MRK, -1.87%, IBM IBM, -0.49%, and Travelers Cos. TRV, -1.10%. The S&P 500 has dropped 17%, the Nasdaq has lost roughly 30%, as well as the Dow had plunged 7 percent on the year as such.
