The S&P 500 is on the verge of achieving its first “golden cross” in 2½ years, but that doesn’t mean stocks are destined for more gains over the coming year. The golden-cross indicator is used by technical analysts as a sign that a particular upward trend in markets or currencies is gaining momentum. Barring a massive selloff in stocks, the S&P 500’s 50-day moving average should cross its 200-day moving average in a matter of days. If it happens, it would mark the first such event since July, 2020, according to FactSet data. Data show it often does precede further gains for stocks over the following six months, or a year, but not always. The S&P 500 has seen 52 golden crosses since 1930, according to Dow Jones Market Data, which used back-tested data to account for the index’s performance prior to its creation in 1957. In that time, stocks were trading higher one year later 71% of the time.But there have been some notable exceptions during periods of heightened volatility.The S&P 500 SPX, +0.25% declined during the 12 months that followed the golden cross that occurred on April 1, 2019, according to Dow Jones Market Data.
This happened again in 1999 as the dot-com bubble burst, and also following a golden cross that occurred in1986, preceding the “Black Monday” crash.