A golden cross forms when the asset’s 50-day simple moving average (SMA) crosses above its 200-day SMA.
Such an event indicates that this asset’s prices have been climbing of late, enough to be higher than its longer-term average.
At the time of writing, the gap between those two widely-followed technical indicators now stand at less than 4 points on the SP500.
When it happens, the “golden cross” tends to send a “bullish” signal to traders, suggesting there could be more gains in store.
NOTE: The S&P 500 index is a benchmark which measures the overall performance of US stock markets.
Here’s how the SP500 has fared following its past three “golden crosses”:
The world’s most important central bank is back in action again next week.
On February 1st, the Fed is due to announce how much higher it will send US interest rates.
At the time of writing, market forecasts are based on the following:
Note that, generally, many asset classes such as stocks, gold, and even cryptos do not enjoy US interest rates moving higher.
Hence, if the Fed signals its intentions to move US interest rates even higher past the market-forecasted 5%, that could drag the SP500 lower.
However, if the Fed signals that it’s indeed ready to pause its rate hikes, that could translate into more gains for the SP500.
Apple, Alphabet (Google’s parent company), and Amazon are all due to report their respective earnings from Q4 2022.
Note that these stocks are some of the biggest in the world.
Combined, all three stocks have a market cap of almost 4.5 Trillion (with a “T”) US dollars. That accounts for almost 13% of the S&P 500’s total market cap of about US$35 trillion (as of market close on January 25th).
Hence, given their enormous size, how markets react to the earnings out of these 3 tech titans should have a major impact on how the S&P 500 performs as a whole.
Note that all 3 will report their respective earnings after US markets close a week from today – Thursday, February 2nd.
Hence, expect to see a major reaction in the S&P 500 when the US stock market reopens on February 3rd – the day following the earnings release by Apple, Alphabet, and Amazon.
If such a bullish technical event does happen for the SP500, equity bulls (those hoping stocks will move higher) will be looking to next conquer the following resistance levels:
A closing price above the 4144.2 intraday peak would signal a bullish breakout of the year-long downtrend.
Such price action may well entice even more stock bulls back to the fore.
However, if market sentiment turns sour that could drag the S&P 500 back below the psychologically-important 4,000 mark.
From a fundamental perspective, this could be due to any of the following:
If so, then the following support levels will start to likely tempting to equity bears (those who believe that stock prices will fall):
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Lukman Otunuga is a research analyst at FXTM. A keen follower of macroeconomic events, with a strong professional and academic background in finance, Lukman is well versed in the various factors affecting the currency and commodity markets.