Many market watchers are focused on the much-watched relationship between the 200-day and 50-day moving averages in the major indices. Not too long ago, the shorter-term average crossed below the longer-term average after having moved above it for a good while, triggering a sell signal in many camps along with expectations for the end of the bulls' run. Carl Swenlin of decisionpoint.com, a technician whose work I respect, waits for the exponential moving averages to confirm a cross, a parameter I also wait for. However, I also watch for a very decisive cross before I give the "event" much weight, and this hasn't yet occurred on any of the major indices. While Mr. Swenlin announced a cross and long-term trend change on Friday, to my mind Friday's "cross" was more of a kiss, and not a very passionate one at that. Perhaps the bulls' party is indeed ending and we're in the process of moving into bear territory again, but maybe not. As far as I'm concerned the market is stuck in "no man's land" and I'll be waiting for more convincing evidence before reaching conclusions. There have been other times when even the exponential moving average cross occurred only to turn back up soon after, and times when it can take months to settle on a direction. This was the case in 1993 when the so-called "death cross" took place, but the market responded by essentially moving sideways in a consolidation phase before launching a breathtaking multi-year bull run. There was also a brief cross in 1998 following a routine bull market correction. Time will tell.
The outcome of the 1993 "death cross":
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