A bullish “golden cross” pattern has appeared in the Dow Jones Industrial Average’s chart, to suggest a new longer-term uptrend has begun, exactly three months after the opposite “death cross” warned of a downtrend.
A ‘golden cross’ chart pattern occurs when the 50-day moving average (DMA), viewed by many as a shorter-term trend tracker, rises above the 200-DMA, which is seen as a longer-term trend divider. Many technicians believe the crossover marks the spot a shorter-term rally transitions to a longer-term uptrend.
On Tuesday, the Dow’s DJIA, -0.10% 50-DMA rose to 25,177.57 intraday from 25,128.34 on Monday, while the 200-DMA rose to 25,165.71 from 25,158.32, according to FactSet data.
The Dow slipped 19 points in afternoon trade, paring earlier gains of as much as 196 points. That has lifted the index to within 934 points, or 3.6%, of its Oct. 3, 2018 record close of 26,828.39.
That would erase the negative technical effects of the death cross, when the 50-DMA fell below the 200-DMA on Dec. 19, 2018.
The Dow dropped over 1,500 points, or 6.6%, to a 15-month low in three days after that death cross, but the Dow is currently 11.7% higher than it was three months ago.
Golden and death crosses aren’t always good market timing signals, as they are usually telegraphed well in advance. They can, however, act as a reminder that the recent market trends have lasted long enough and traveled far enough to be considered more than just a typical bounce or pullback.
See related: The Dow is on the verge of a bullish golden cross, but stock-market analysts aren’t exactly cheering.
The Dow’s most recent golden cross appeared on April 16, 2016, or 66 trading sessions after the previous death cross. The blue-chip barometer rallied nearly 5,300 points, or 29%, until the appearance of the next death cross.
The following are the Dow’s previous golden crosses over the past 10 years, the number of trading sessions that they appeared after the preceding death crosses, and the Dow’s performance and trading days until the next death cross:
| Golden cross | Trading days after the previous death cross appeared | Dow performance until the next death cross appeared | Trading days until the next death cross appeared |
| April 16, 2016 | 66 | +29% | 673 |
| Dec. 17, 2015 | 90 | -7.7% | 17 |
| Jan. 3, 2012 | 90 | +40.4% | 906 |
| Oct. 1, 2010 | 61 | +4.5% | 226 |
| July 2, 2009 | 377 | +21.0% | 254 |
| Source: FactSet, MarketWatch | |||
Within the Dow, the stock charts of 16 of 30 components have 50-DMAs that are above the 200-DMAs.
Meanwhile, the S&P 500 index SPX, -0.01% is about six or seven sessions away from producing a golden cross, based on current trajectories of its 50-DMA and 200-DMA, while the Nasdaq Composite Index COMP, +0.12% is about nine sessions shy.
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