It seems as though the much ballyhooed "Golden Cross" has arrived. The 50 day moving average has crossed the 200 day moving average one day after the S&P 500 lost 3%, the second Monday in a row which saw the markets sell off precipitously. Last Tuesday the selloff from Monday continued but yesterday the market seemed to be meandering plus or minus a little bit.
The question remains, whereto fore the market? On the intraday chart, the 50 day and the 200 day moving average crossed at just about 12:25. The market seems to have taken notice as the index has rallied about 3 points since then. But despite the cross and the bullish implications one cannot ignore the bearish implications of the selloff last week and Monday. Is this the much anticipated "healthy" pullback, or does the World Bank's revised economic outlook, an expected 2.9% contraction of the global economy this year vs. its March prediction for a contraction of 1.7 percent, presage new and significant declines to come?
If the index manages to follow up last weeks losses with a lower close this week the bears will begin to make more noise and the calls for the resumption of the bear market and the end to the "bear market rally" intensify. And the bulls might have cause for worry. Despite the Golden Cross, the S&P is now, on the three month chart, trading below both the 50 day and 200 day moving averages, and 900.00 seems a potential level of resistance.
Couple that with the concern that many profitable bulls have that the markets are destined for a sustained pullback and we could end up with a self-fulfilled prophecy. We've been waiting for the pullback. Now let's make it happen.
Disclosure: I own shares of SDY