Is the market signaling a bottom is in?

The S&P 500 breached a very important technical milepost this week. That could put a floor on any losses.

By Charley Blaine Jun 19, 2009 2:05PM

Charley BlaineThe stock market is little changed this month.

 

But without much fanfare, the market told investors this week that the bottom that came in March was real.

 

That could mean the market has a good chance of heading higher. Here's why. 

 

On Tuesday, the 50-day moving average of the Standard & Poor's 500 Index ($INX) moved above the index's 200-day moving average.

The last time the index saw what some analysts call the golden cross was in March 2003, which was when a big breakout occurred after the dot-com bust.

This is a very important technical signal. The Nasdaq crossed over in May; the Dow Jones industrials ($INDU) could see the cross in the next few weeks.

 

How important?

 

In December 2007, when the 50-day moving average dropped below the 200-day average, the bear market erupted. With force. With extreme pain.

This is not to say that the market is poised to shoot sharply higher.

 

As noted, the market is now trading sideways.

 

The Dow and the S&P 500 are up only slightly this month compared with gains of 7% or more in March and April and 4% and 5%, respectively, in May. The Nasdaq jumped 11% in March, 12.44% in April and 3.3% in May.

 

But it does suggest that any sell-offs could be modest.

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