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Bollinger: ‘Golden Cross’ Psychologically Important

Tuesday, 31 Jan 2012 | 7:25 PM ET

Although the S&P 500 began the year with a bang, posting its best January since 1997 and forming a “golden cross,” technical analyst John Bollinger said the metric wasn’t overly important.

“This is the perfect example of the tool and the task being mismatched,” the president of BollingerBands.com said on “Fast Money.”

The January Effect & the Golden Cross
John Bollinger, Bollinger Bands.com, discusses the "golden cross" and the S&P 500, saying this is the perfect case of mismatching the tool and the task.

The S&P officially closed at $1,312.41, forming a “golden cross,” which is formed when the 50-day moving average surpasses the 200-day moving average, a sign of a bull market.

But Bollinger added a caveat.

“The golden cross is a great tool in a big, roaring bull market, like the bull market from 1982 to 1998, when it tells you when you’re supposed to be in the market and tells you periods in which the risk is somewhat higher of corrections and such,” he said. “But in a big sideways market like we’re in, the Golden Cross will tend to get you in toward the upper end of the range, tend to get you out toward the bottom end of the range.”

Bollinger said there exist two versions of the January barometer: The first five days or the first month as an indicator for the entire year.

“The first five days has a slightly better track record than the month as a whole, but neither of them are markedly different than a coin toss,” he said. “I think they’re important psychologically, though, especially the first month.”

Bollinger said a strong January keeps investors tuned in.

“There’s every reason to believe that it’s pretty good sailing into the middle of the year,” he said. “I don’t think we’re going to see giant gains into the middle of the year, but I think it’s going to be a good time to own equities going forward.”

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Trader disclosure: On Jan. 31, 2012, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders: Adami owns C; Adami owns GS; Adami owns MSFT; Adami owns AGU; Adami owns NUE; Adami owns INTC; Adami owns BTU; Finerman owns AAPL; Finerman owns BAC; Finerman owns JPM; Finerman owns MSFT; Finerman owns IBM; Finerman owns GOOG; Finerman owns ORCL; Finerman owns GPN; Finerman owns CF; Terranova is long VRTS; Terranova is long LQD; Terranova is long MUB; Terranova is long EMC; Terranova is long AXP; Terranova is long JOY; Terranova is long MCD; Terranova is long OXY; Terranova is long IBM; Terranova is long SU; Terranova is long TRLG; Terranova is long CNX; Terranova is long SBUX; Terranova is long SNDK; Terranova is long GOOG; Terranova is long MA; Terranova is long UNG April $5 puts; Terranova is long AAPL Feb 430 puts; Terranova is short AAPL put spread; Terranova is short AAPL Feb 440 puts;

For Jon Najarian
No disclosures

For Larry Haverty
Gabelli Multi-Media Trust is long AMZN

For John Bollinger
Bollinger has positions in IWM

Bollinger has positions in Small Cap Russell 2000

For Rishab Ghosh
No disclosures

For Kerry Rice
(AMZN): I, Kerry Rice, hereby certify that the views expressed in this research report accurately reflect my personal views about the subject company (ies) and its (their) securities. I also certify that I have not been, am not, and will not be receiving direct or indirect compensation in exchange for expressing the specific recommendation(s) in this report.

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