'Golden cross' for stocks doesn't always glitter

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The Dow Jones Industrial Average triggered a technical signal on Tuesday that ma...

NEW YORK - The Dow Jones Industrial Average triggered a technical signal on Tuesday that many investors believe could portend more gains for stocks in the short term, known as the golden cross.

In the case of the Dow on Tuesday, the 50-day moving average crossed above the index’s 200-day moving average, which is the most widely watched combination among technicians. Some analysts employ additional criteria in determining whether a cross is triggered, for example, if both moving averages are sloping upward, which the Dow’s currently are.

“All signs are pointing towards continued good performance, and the golden cross just accentuates that because that is another positive story,” said Ken Polcari, managing principal at Butcher Joseph Asset Management in New York. Still, the golden cross is far from a bulletproof signal. According to Sam Stovall, chief investment strategist at CFRA Research in New York, using a “golden cross” strategy yielded a lower return than the compound annual growth rates for the Dow and smallcap Russell 2000 index since 1990.

 

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