The Golden Cross & Death Cross

These are very powerful bullish and bearish long-term signals that every trader should know. I posted this in the PCX thread but believe it is deserving of its own thread.

A golden cross is a very bullish long-term indicator that happens when the 50dma (short-term data) crosses above the 200dma (long-term data). A lot of stocks are getting these golden crosses because the 200dma incorporates data going all the way back 10 months while the 50dma is a collection of just the last 2 and a half months. Are you sure the 200dma goes back 10 months? Yes! This is so because there are 4 weeks in a month and 5 trading days in a week so only 20 days of data is collected per month on average). So as of today (mid-July 2009) the 200dma takes data going back all the way to mid-September 2008 while the 50dma is a collection of data going back just to beginning of May. A death cross is the same thing except when the 50dma crosses below the 200dma. The golden cross is coming very soon for PCX (a stock I currently own). Here is the chart for PCX with just the 50dma/200dma for easy reading:

Wow. The lady he was referring to who said 800 on the S&P must have lost a ton of money. The date of the video was June 25. The S&P closed at 920 on June 25.

Now the S&P is at 1091 so the index increased 18.6% since that video!! And it's only been 5 months.

I'd say they work almost every time. When talking long-term I'd say from what I have seen they work 80% of the time. And by long-term I mean buying at the date of the golden cross and checking the price again 1 year or more later.

There are incidences when it doesn't work. Perfect example was CHB. Got a golden cross and then a couple weeks later declared bankruptcy...

As long-term indicators carry more weight, this trend indicates a bear market on the horizon and reinforced by high trading volumes.Last week a technical formation had a lot of nonsense about a 'golden cross' the rapid is believed to have called the implications. Pattern occurs when prices in the short term than long-term prices are rising at a faster rate than.
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I think in the macroeconomic point of view you need to analyze all the macroeconomic indicators in order to arrive at better decision making level.I have check the analytical chart given above is a good effort to achieve efficiency.
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These are very powerful bullish and bearish long-term signals that every trader should know. I posted this in the PCX thread but believe it is deserving of its own thread.

The golden cross is coming very soon for PCX (a stock I currently own). Here is the chart for PCX with just the 50dma/200dma for easy reading: