“Though the signal is bullish, they sometimes prove to be false. Either way, a big move usually follows their convergence,” the Investors Intelligence analyst wrote in a newsletter. “The small-caps continue to trade flat on a relative basis versus the Dow Jones Industrials. That is not indicative of a bull market since the more speculative stocks typically lead to the upside in such a climate. However, should the relative chart break higher it would improve the general market outlook considerably.”
For more information on trend following, visit our trend following category.
Max Chen contributed to this article.