Announcer:
4 Your Money is brought to you by NelsonCorp Wealth Management.
Brandy Auterson-Hurst:
It’s now time for 4 Your Money. We’re joined by James Nelson, Financial Planner at NelsonCorp Wealth Management. Welcome back, James.
James Nelson:
Thanks for having me, Brandy.
Brandy Auterson-Hurst:
So momentum has been strong lately in the stock market. Is that backed up by the technical picture?
James Nelson:
Yeah. Overall, the technical or price-based indicators are looking really strong right now. One of the simplest ways to view that is through moving averages. Moving averages smooth out the day-to-day volatility. One of the most widely used signals is something called a golden cross. That’s when the 50-day moving average crosses the 200-day moving average. And historically, that’s been a very positive sign for stocks. And when that happens, that usually means the stock market’s gaining strength.
So that’s the chart I brought along today. All three US stock indexes, that’s the S&P, the Nasdaq, and now the Dow, are in a golden cross. The Nasdaq and the S&P hit this milestone earlier this year and the Dow hit it last week. So you can see in the charts here that the red line, which is the 50-day moving average, is above the yellow line, which is the 200-day moving average for all three indices. So again, this is a very positive outlook for stocks and something that analysts look at pretty closely.
Brandy Auterson-Hurst:
Okay. So why would you say this is important for investors?
James Nelson:
Well, historically, when all indices hit a golden cross around the same time, that’s a positive for stocks. Generally speaking, in the very near-term, stocks do really well and 80% of the time after a golden cross has hit, if you look a year out, 80% of the time, stocks are in positive territory. So it’s just a positive sign overall. There’s no perfect indicator, but things look pretty bullish for stocks right now.
Brandy Auterson-Hurst:
All right, James. Thanks for taking the time to talk to us today.
James Nelson:
Thank you, Brandy.
Brandy Auterson-Hurst:
If you missed any of our discussion, we’ll make it available for you on ourquadcities.com.
Investing involves risk. Depending on the types of investments, there may be varying degrees of risk. Investors should be prepared to bear loss, including total loss of principal.
Indices mentioned are unmanaged and cannot be invested into directly.
This video includes a paid appearance.