Trade Alert For Equity & ETF Models
A golden cross occurs when a shorter moving average crosses above a longer moving average. Conversely, a death cross occurs when a shorter moving average falls below a longer moving average. The graph below shows the equal-weighted S&P 500 just experienced a golden cross with the key 50 and 200-day moving averages crossing. The equal-weighted index is not a primary, well-followed index. However, its recent golden cross is a positive sign that the broader market’s breadth is improving. In contrast, the 200- day moving average on the S&P 500 is still 100 points above its 50-day moving average. The S&P 500 must continue to rally for a while to see a golden cross.
Since 1970, the S&P 500 has been returning about 15% gains on average in less than a year after a golden cross’ occurrence. However, golden crosses can result in a false breakout and quickly turn into a death cross. Therefore, one should consider the golden cross pattern but use it alongside other technical indicators for the best results. Additionally, the golden cross may indeed portend a good rally in the coming month or two, but as we saw on three occasions in 2022, double-digit rallies were followed by lower lows.
This morning we added 5% of the equal-weighted S&P 500 (RSP) to both models. We remain well below our benchmark weighting, and technicals are turning more favorable for a near-term market rally. Further, RSP just had a golden cross (50dma>200dma). We will write this up in tomorrow’s commentary. We also added 1% of Goldman Sachs (GS) to the equity model ahead of upcoming earnings.
Equity Model:
- Initiate a 5% trading position of S&P 500 Equal Weight ETF (RSP) to the portfolio
- Add 1% to Goldman Sachs (GS), bringing position weight to 2%.
- Sell 2% of the 1-3 Month Treasury Bill ETF (BIL) to raise cash for purchases.
ETF Model
- Initiate a 5% trading position of S&P 500 Equal Weight ETF (RSP) to the portfolio
- Sell 2% of the 1-3 Month Treasury Bill ETF (BIL) to raise cash for purchases.
Lance Roberts is a Chief Portfolio Strategist/Economist for RIA Advisors. He is also the host of “The Lance Roberts Podcast” and Chief Editor of the “Real Investment Advice” website and author of “Real Investment Daily” blog and “Real Investment Report“. Follow Lance on Facebook, Twitter, Linked-In and YouTube
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