Despite worries about inflation and an impending recession, there is at least one sign that some optimistic market analysts could cling to.
An upbeat golden cross appears to be forming in the Dow Jones Industrial Average DJIA, -0.41%, more than nine months after a bearish death cross formed in March when the Federal Reserve’s tightening agenda crushed bullish Wall Street.
A gold cross occurs when the 50-day moving average for an asset price is trading above the 200-day MA, while a death cross occurs when the 50-day moving average falls below the long-term average.
The 50-day moving average for the Dow is 32,200.32, last Friday afternoon, while the 200-day moving average is 32,460.71, a difference of about 260 points to be surpassed in the coming week or two could, based on its current trajectory.
fact set
A gold cross would be the first for the Dow Industrials since August 2020, according to Dow Jones Market Data.
The bullish chart formation would also come at an unusual time for investors as the stock market is showing an obvious uptrend even as the threat of a 2023 recession grows.
Read: Financial markets are warning of an imminent recession: Here’s what this means for equities
See: Goldman Sachs CEO says recession is likely, with 35% chance of a soft landing
BlackRock, the world’s largest wealth manager, is anticipating a recession unlike any we’ve seen in US history.
“The new macro regime is playing out. We think this requires a new dynamic playbook based on assessments of market risk appetite and macro damage pricing,” wrote BlackRock’s Investment Institute team, led by Jean Boivin.
The BlackRock team said markets are not necessarily pricing in the forecast recession.
“Central banks appear determined to do ‘whatever it takes’ to fight inflation, which we believe portends a recession,” BlackRock’s team wrote.
Overall, as MarketWatch’s Tomi Kilgore notes, crosses are not necessarily good indicators of market timing.
Cash: MarketWatch’s live blog of the market
Additionally, MarketWatch columnist Mark Hulbert concludes that, on average, the US stock market has not performed any better after a gold cross than at other times.
In many cases, a gold cross can help put an asset’s movement in perspective, but they are usually well telegraphed.
Interestingly, the recession is also widely predicted and some don’t think investors will get the memo. As BlackRock notes, investors are not counting on the damage to come, especially since profit expectations for American companies are reasonable.
So it could be worthwhile for investors to be cautious about gold crosses in assets.
So far over the past three months, the Dow Industrials have outperformed, up about 5%, compared to a 2.5% decline for the S&P 500 SPX (-0.24%) and a 8.2% decline % for the Nasdaq Composite COMP (-0.13%).
Over the past three months, Dow Industrials overall have risen on gains in Caterpillar CAT, -1.09%, Boeing Co. BA, +0.58% Merck & Co. MRK, -1.38%, IBM IBM, – 0.11% and Travelers Cos. TRV, -0.57%.
Year to date, the Dow is down 7%, while the S&P 500 is down 17% and the Nasdaq is down nearly 30%.