This morning the S&P 500 (NYSEARCA:SPY) briefly breached 1,318, forming what is called a Golden Cross which, along with lackluster economic data, has contributed to notable volatility across the U.S. indices today, as many technical traders try to assess which direction the market will go from here over the short-term.
A Golden Cross, in this situation, occurs when the 50-day moving average crosses and closes above the 200 day moving average over a six-month time frame (it doesn't look like it's going to happen today for the S&P). As long-term indicators carry more weight, the Golden Cross indicates a bull market on the horizon and is typically supported by high trading volumes. Also, the long-term moving average becomes the new support level in the rising market.
S&P Golden Crosses have occurred 26 times since 1962, and the average three-month gain on the S&P following a Golden Cross has been 4.1%.
If the S&P fails to close above 1,318 today, some speculate that a Death Cross is on the horizon, potentially indicating a substantial short-term pullback.
Many believe the above is all just technical nonsense. However, it should be considered that history has shown that these particular technical indicators have proven to be more reliable than most.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.