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Current DateTime: 08:58:36 24 Nov 2009
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Current DateTime: 08:58:36 24 Nov 2009
LinksList Documentid: 30111251
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Technically, This Market has Legs
Published: Thursday, 30 Jul 2009 | 8:54 AM ET
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Posted by Adam Daniele, CNBC Market Analyst

On Friday, July 24th, the S&P 500’s [.SPX  Loading...      ()   ] 100-day moving average overtook its 200-day moving average, an event known to Wall Street technicians as a Golden Cross (a shorter-term average crossing a longer-term one, from below to above).  A month ago, we saw another major Golden Cross, when the 50-day average moved above the 200-day average.

Historically for the S&P 500, there has been plenty of growth left in the market even after these events occur.  The average 3-month gain after its 50-day moving average crosses its 100-day moving average is 2.7% while the average 6-month gain is 4.3%, with the index trading to the upside 61% and 67% of the time over the respective periods.  The average 3-month gain after its 50-day moving average crosses its 200-day moving average is 9.3% while the average 6-month gain is 16.5%, with the index up 69% of the time for both periods.  The average 3-month gain after the S&P 500’s 100-day moving average crosses its 200-day moving average is 1.8% while the average 6-month gain is 6.7%, with the index positive 64% and 67% of the time over the respective periods. 

As of yesterday’s close, 75% of the S&P 500 companies had 50-day moving averages that were above their 200-day moving averages.  The spread between the two was an average of 8.9% of the 200-day moving average.  Genworth Financial [GNW  Loading...      ()   ], Ford Motor Co. [F  Loading...      ()   ], Office Depot [ODP  Loading...      ()   ], XL Capital [XL  Loading...      ()   ], Tenet Healthcare [THC  Loading...      ()   ], AK Steel Holding [AKS  Loading...      ()   ] and Wyndham Worldwide Corp [WYN  Loading...      ()   ] are leading the way, with 50-day moving averages that are more than 50% higher than their respective 200-day moving averages.  Of course, many of these are trading off such low prices, thereby inflating the differential.  A low denominator helps.

On the other hand, Eastman Kodak [EK  Loading...      ()   ], Citigroup [C  Loading...      ()   ], Marshall & Ilsley [MI  Loading...      ()   ] and Regions Financial [RF  Loading...      ()   ] all have 50-day moving averages that are more than 30% lower than their respective 200-day moving averages.

Additionally, 88% of the S&P 500 companies have 50-day moving averages that are above their 100-day moving averages and 61% have 100-day moving averages that are above their 200-day moving averages.

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