Dow nears a 'golden cross'

The index is close to seeing its 50-day average surpass its 200-day average. What does the phenomenon mean?

By Kim Peterson Oct 1, 2010 2:47PM
The death cross came and went this summer, and no one batted an eye. Will the upcoming golden cross be just as meaningless?

A golden cross is generally considered good news for stocks, and one hasn't been seen in the Dow Jones Industrial Average since 2005. A golden cross occurs when the 50-day average moves higher than the 200-day average (when both are rising).

The 50-day average for the Dow is 0.1% away from the golden cross, Bloomberg reports. It would take a significant sell-off to avoid a golden cross, writes one Seeking Alpha contributor.

As it turns out, a golden cross doesn't mean much. Bespoke Investment Group researched the 36 occasions when a golden cross has appeared in the Dow since 1900 and found mixed results.

In the three months after the cross, the Dow increased only 0.3% on average, Bespoke found. That's hardly impressive, considering the benchmark gains 1.6% in an average three-month period.

"While you may hear people cite the upcoming 'golden cross' as a positive indicator for the market, the historical numbers tell a different story," a Bespoke executive said, according to Bloomberg. "Golden crosses may work for some securities, but they haven't for the Dow."

More from MSN Money:
0Comments

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

STOCK SCOUTER

StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

114
114 rated 1
278
278 rated 2
474
474 rated 3
641
641 rated 4
639
639 rated 5
663
663 rated 6
640
640 rated 7
499
499 rated 8
284
284 rated 9
122
122 rated 10
12345678910

Top Picks

SYMBOLNAMERATING
COPCONOCOPHILLIPS9
TAT&T Inc9
VZVERIZON COMMUNICATIONS9
KOGKODIAK OIL & GAS Corp9
CVXCHEVRON CORPORATION8
More

VIDEO ON MSN MONEY

ABOUT

Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.