Golden Cross?
Yes a golden cross has formed – but is not yet confirmed. The white space between the SMAs is only 0.6% (see chart).
I am extremely twitchy about this rally – SPY has even made a new high! Crazy. But the last four days, while the market was going up sharply, the volume was significantly below average which means that there wasn’t much conviction behind it. As I said in the last blog – probably dip-buyers and day traders. I don’t think there has been much institutional buying at all.
A strategy is a strategy
However, a strategy is a strategy – and we should follow it, but:
- We have not yet reached the whitespace (1.5%) for the cross to be confirmed. (currently 0.6%)
- We have a similar scenario detailed in the new book
Christmas in April?
We have the new rule that we do not enter any NEW trades during the Christmas / New Year period. Why? Because the volumes are low and it doesn’t take much to move the market.
And that is what we are seeing now, which makes standing back the smart thing to do. Wait until we are sure before we enter.
When will we be sure?
When the volumes are back to normal and there is 1.5% white space between the 2 SMAs. Let’s check the charts:
SPY Chart
We can see that the SMAs have crossed, but the gap is only 0.6%. It must be over $10 to meet our criteria. Also, check out the lack of volume (pink box)
SPYG Chart
Not at a golden cross yet, because it dropped more than SPY.
QQQ Chart
No golden cross there either, for the same reason.
The Futures . . .
. . are not looking too rosy, but it is still 6 hours to market open.
What do we do now?
Wait for the golden cross t be confirmed (and the volumes to return to normal). I will do another blog post when that happens.
The main purpose of the stock market is to make fools of as many men as possible.
Bernard Baruch
Heather
Trade the tide – not the waves
