The S&P 500 just concluded its best January since 1997, with a 4.4 percent gain.
That gain has market observers talking about the January Effect in stocks, namely that "as January goes so goes the year."
But there's another hot topic regarding the S&P 500, called the "Golden Cross." That's when the 50-day moving average moves above the 200-day moving average, which is supposed to be a bullish signal.
On January 31, the "Golden Cross" did form on the S&P 500 chart. Even though the S&P 500 closed the day in slightly negative territory, the index's 50-day remained above the 200-day.
What's our view of moving averages as a forecasting tool?
"We don't use moving averages to forecast waves since they naturally lag the market, but since major-moneyed investors do watch them, we should be aware of their position relative to prices."
Short Term Update, Dec. 23
As for what we do follow, the bedrock foundations for market analysis and forecasting are patterns, momentum and sentiment.
What are the three revealing now?
Well, let's look at sentiment:
"...since the December 19 low the trend in optimism has been on the ascent (whereby more volume consistently flows into calls than puts), reaching a nine-month extreme in conjunction with the recent stock market highs. In fact, equity-options traders are betting on a continued advance to a greater degree than they did at the April 29/May 2...stock peak (close/intraday)."
Short Term Update, Jan. 27
When everyone crowds on to one side of the boat, they better have on life jackets. It's just a matter of time before they get wet.
Momentum?
Did you know that stock exchange volume has mostly been decreasing since October? It's true. Moreover, volume recently dropped to its lowest level in 4 years.
As you probably know, volume is the fuel which powers sustained rallies.
Allow me to refer you to the latest Short Term Update for the stock market's Elliott wave pattern.
In conjunction with momentum and sentiment, the market's price pattern is telling an attention-riveting story. We can help you get ready for the final chapter. How?
We're offering you a 30-day risk-free look at the Short Term Update, which is published every Monday, Wednesday and Friday (plus additional days when market conditions warrant).
Follow this link to start reading the latest Short Term Update>>