Wednesday, July 1, 2009

Golden Cross or Golden Goose?

The title of this blog post was the pre-edited title for today's column. Considering I think that stocks will not turn to gold it is a much better capture of my thinking. Perhaps it was just not snappy enough as a headline for an online news magazine where I have to compete for eyeballs.

Here's the "abstract" telling the reader what the story is about:

"Some think that the Nasdaq has rung the bell making it safe to buy stocks again."

Clearly, I do not and I do not believe that the golden cross on the Nasdaq or the tech sector or the yen for that matter mean anything for the market as a whole.

I've taken a lot of heat lately for not accepting the bull side. Somehow that makes me feel better in that I do not agree with the masses. I learned from a trader friend a long time ago that if make a trade and then want to throw up on your keyboard you probably made a good trade.


Babak said...

Michael, re your recent article in Barron's: Will Stocks Turn to Gold?

One or two examples are hardly enough to give us an insight into historical patterns of the golden cross.

Take a look at this recent article which references a few different studies on the golden cross. You can also download the most extensive one from Merrill Lynch's Bartels.

PD Quig said...
This comment has been removed by the author.
Laborboy said...

Another good column, Michael. I am wondering though--several sources state that the SP did in fact fire a Golden Cross, including the afore-mentioned Ms. Bartels. It was also mentioned on CNBC's Fast Money that the cross was last Tuesday. Any thoughts?

Quick Takes Pro said...


Here is the last paragraph of my column as I sent it in. It ended up on the cutting room floor.

"Clearly, this is a small data set but I’d rather follow a system that worked well to help me avoid the bulk of both bear markets in this decade and get back into the market to catch the bulk of the bull in between the bears."

As you can see, I was acknowledging the statistical insignificance of the analysis even though it made me money.

Quick Takes Pro said...

note to all - with the 200-day average still falling many would not believe a golden cross no matter which type of moving average was used

Quick Takes Pro said...


The S&P 500 had a moving average crossover but not a golden cross using my definition - i.e. exponential moving averages.

Babak said...

I see, thanks.
Did you take a look at the historical data which shows that a golden cross is bullish?

I'm curious to know what your take is on the detailed ML report.

Quick Takes Pro said...


I read the report and agree that the slope of the 200-day matters. However, notice that the slope of the 200-day was rising when the death cross happened at the start of the bear market. That puts a dent in the theory.

I stand by my use of exponential averages only.