IWM Weekly Golden Cross Spells Doom

A golden cross is supposed to be good news, and on the weekly chart IWM’s 50-week average (red line on chart) has crossed above the 200-week average (blue line). Click chart to enlarge:

So, “what’s the problem,” you ask? Well, this type of cross is very rare. In fact, this is the only one since the IWM was invented ten years ago. To see more, we have to go to the long-term Russell 2000 chart:

Now, let’s take a closer look at those two crosses. First, the one in January 2004:

After making the cross, the market corrected until the middle of August! Things worked out a little bit better after the September 1991 cross, but the market still went sideways for three months:

The moral of the story is that it takes a lot of work for the market to make a Golden Cross on the weekly chart. And an extended period of consolidation shouldn’t come as a surprise.

21 Responses to “IWM Weekly Golden Cross Spells Doom”

  1. scotty says:

    So Matt are you looking for a 5%+ correction at this junture

  2. admin says:

    Scotty,

    I wouldn’t be surprised to see the SPX correct further. However, the economy is expanding, after a fashion, and the Fed is pumping, so it’s no slam dunk.

    Matt

  3. after says:

    spoos up about 4

  4. after says:

    spoos now down a couple

  5. George says:

    Nice analysis Matt.

  6. George says:

    Another gap-begets-gap day. Fade the gaps at the appropriate time and winners all ’round.

  7. George says:

    Financials gap filled.

  8. 2thfixr says:

    Retest of 1173 looks to be upon us. Break that level, and into the 1060’s and possibly the 50-day SMA for the next resistance.

    G, I believe in gap fills too, but I’m guessing since Europe is driving the bus right now, we’re going to gap-gap-gap just like the Asian markets have ALWAYS gappd since we are reacting to the Euro news just as Asia typically reacts to our news. Just an outside observation and something to ponder.

  9. 2thfixr says:

    Correction: we ARE AT the SPX 50-day SMA right now. Sorry for the bad data.

  10. George says:

    2thfixr,

    I reckon gaps indicate some sort of mentality – which I don’t understand. Phil pointed out that not all get filled, which is true, but the majority seem to get filled and that’s a small leverage for trading them.

    SPY has yet to fill its intraday gap down made on the 26th.

  11. 2thfixr says:

    G, I think gaps that start moves are more likely to NOT get filled once the trend moves away from them. Think of the last gasp up or down reaching and getting rejected by overwhelming buying or selling sending the market in a new direction–that gap will remain open for quite a while, so not a short term trading beacon. But gaps along the move, indicate either an unhealthy market or events outside of the normal trading hours are directly impacting the price of equities. Right now, I think we are in a period of outside events AND unhealthy/manipulated markets–hence LOTS of gaps recently.

    1181 is holding as pretty firm resistance here. (And once I write this, it will of course break above it–always does!)

  12. phil says:

    g

    triangle today spy

    post triangle thrust to new lows is a BUY

  13. phil says:

    triangle broke upwards

    getting above 1187 targets 1200 in wave C up

  14. phil says:

    we are in 3 of 3 up now

    my sell target is 1199 spx

  15. George says:

    p,

    Nice call… looks like green is in SPY’s future.

  16. phil says:

    g

    thanks

    i thought there would be one more push down that i could buy cheap but i had to pay up…now have large gain as cushion from rocket blast up …selling half soon

  17. phil says:

    g

    1200 today?

  18. George says:

    SPY gap down on the 29th filled.

  19. George says:

    VIX Death Cross on the weekly that Matt pointed out months ago is still in effect.

    http://i52.tinypic.com/209powl.jpg

  20. George says:

    p

    I’m showing a double top on SPY weekly.

    I’m thinking SPY is bouncing around in this daily zone trying to find direction. Maybe letting the MACD bounce off zero and head higher. The bearish view of course, would be a drop below consolidation support.

    http://i53.tinypic.com/2qu3hn9.jpg