Exchange traded funds indexed to the S&P 500 are experiencing a bullish technical sign known as a “golden cross” as the 50-day simple moving average crosses above the 200-day. However, the indicator doesn’t have a perfect batting average for predicting rallies.
U.S. stock ETFs have been enjoying a decent rally since the most recent market low in early October of 2011.
According to Birinyi Associates, the S&P 500 is closing in on a golden cross for the first time since 2010, reports Lu Wang for Bloomberg.
Since the Oct. 3 low, the S&P 500 has gained 20%, bringing the 50-day moving average just a few basis points shy from crossing over the 200-day trend.
Birinyi pointed out that the S&P 500 has formed 26 golden crosses since 1962 when the S&P’s short-term average moved above its long-term trend. The index showed positive returns 81% of the time, with an average increase of 6.6% over the following six months.