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Even though the S&P 500 fell Monday, its chart experienced a “golden cross.” When I discussed this topic last week in regard to the Dow Jones Industrials, we determined that, while a golden cross wasn’t such a great indicator historically, it had performed well recently — and I recommended that investors see it as a positive development.
You may recall that a golden cross occurs when the 50-day moving average of an index or stock crosses above its 200-day moving average as both moving averages are rising. For the S&P 500, performance has been fairly bullish, according to data published by Bespoke Investment Group today. There have only been 16 prior “golden crosses” for the S&P 500 in the index’s history, so they’re very rare, the analysts report. The most recent came on Oct. 22, 2010.
The table above shows the dates of all S&P 500 “golden crosses,” and for each occurrence Bespoke shows how the index performed over the next week, month, three months and six months. While performance over the next week is hit or miss, median returns over the one-month, three-month, and six-month periods are all stronger than normal. Notably, the analysts point out, the index has been up over the next month, three months, and six months following the last six “golden crosses” going back to 1998 (see grey shading).
In itself, this is not a reason to go out and buy the index. But, if you are already positively inclined, like I am in my Trader’s Advantage service, or are waiting for more evidence of a sustainable rebound before putting cash to work, this can provide legitimate support.
As such, I’ve got a bullish name for you today.
Waste Management, Inc. (NYSE:WM) was one of the best stocks on the board in the first three months of the year, repeatedly setting new highs. This month it has pulled back to its rising 21-day average and has found support there.
Buy Waste Management at current levels with the expectation of a run back at the highs.
Set up to sell of the position in Waste Management at my final target target $58.95 and set at stop at $54.60, good after 10:30 a.m. ET only.
Jon Markman writes a daily trading newsletter, Trader’s Advantage, and CounterPoint Options, a service geared towards helping individual traders make steady, consistent profits with the VIX. Follow him on Twitter for his latest take on markets and innovation.
