Friday, December 30, 2011

The Appearance of Golden Crosses in 2012 and What It Means

There is something very fascinating occurring in the markets, golden cross formations are in various states of development in the U.S. stock market and oil market. I don't pay attention to most technical signals, other than things like head and shoulders formations, which can be explained in terms of human action. However, golden cross formations developing in key markets are quite intriguing.

A golden cross formation occurs when a 50-day moving average of price activity crosses over a 200-day moving average. This indicates that upside price activity over the recent 50 days is more intense to the upside than it was over the last 200 days ago.

If this occurs in one commodity, it is an interesting thing to watch relative to that commodity, but when it is occurring relative to oil and the US stock market, it is suggesting an across the board increase in upside price pressure.

Even more fascinating is that these golden cross movements don't occur that often. In oil, these crosses have only occurred seven times since 1984.

In the case of the Dow, according to the Bespoke research,  in the last 50 years, the golden cross on the Dow has only occurred about 20 times.

I don't view these golden cross formations as necessarily predicting strong markets ahead, by themselves,, BUT it is telling me that upward price activity is intensifying in these two key markets. If I couple this with the fact that Ben Bernanke has been printing money aggressively in recent months, it suggests to me that Bernanke's money printing is indeed making it into the markets. I believe the money in the system is strong enough to keep markets strong for some time, and if Bernanke keeps up the money printing, price activity to the upside for the stock market, oil and most other commodities will be very strong at least for the first part of 2012.


  1. what is your outlook on gold and silver prices for 2012?

  2. How long can both oil and the stock market rise at the same time? With oil at 100 NOW, where will it be if there is any real increase in economic activity? Will the Stock market tolerate oil at 150?

    Also, where will the European bond markets go? Will the ECB be able to keep Italian/Spanish bond yields under control. And since the ECB is lending money to banks so that they can buy bonds, if yields do go up, what happens to the value of the bonds that European banks are holding?

    And what would that mean for the solvency of banks that are already under stress?

  3. I too would like to know your outlook on gold and silver. I guess if there is lots of price inflation, it will be good unless people just see that as a "growing" economy.

    But I am a little naive about what you have been talking about in this articles and others when you say Bernanke has been printing lots of money in recent months. To what are you referring? Sorry if I seem clueless. Are you talking "Operation Twist". Which I still don't understand even though I have been following your blog. Or is QE still going on under the radar even if not officially?

  4. For me - gold and silver - will enter a 'consolidation' phase. Don't expect much upward movement unless something dramatic (negative) happens.
    Support will be found near the 1500/oz level for gold. Silver remains steady at around 26/oz.
    Once inflation takes off...IF it takes off and there is no further PM manipulation...then expect rapid rise in PM prices.
    Of course...if the next global war kicks off...all bets are off ;-)

  5. Anon 4:34 PM

    I think what Robert is getting at is the initial QE I, lite, II, Twist etc is now starting to hit the economy. The banks have trillions sitting in reserves making nominal interest. The bankers perceive that risk is now down so they are spending/lending the cash. The drop in unemployment and the boom in the luxury car/real estate/goods markets show that the cash is being spent. With our fractional reserve lending system the money supply will explode when it hits the middle and lower classes and we will have mass inflation. Or it could be sooner than that in the stock market or commodities. It will be like a snowball rolling down a hill, small at first but gaining momentum until it is huge and unstoppable. The best advice is to buy gold, silver or other goods now at these 'low' prices.

  6. I wish I can see what you see... As of today, DJI
    SMA(200) = 12,242
    SMA(50) = 12,236
    Closest was 12,243 and 12,238 respectively.
    There's no gold cross, but yes - it's kinda close.

  7. Palladium now. Gold thru 2012, Platinum now and beyond, and Silver could explode beyond that if you believe the USGS report I keep getting mail about. These are the tickers to look at. I won't include AA or BHP until I see a more global recovery. BRAZIL not the EWY but VIV ABV BRFS ADR PBR VALE. best of PRMPF - FDX FCX BXP APA RIO. Energy - LGCY AGHP CLR PXD CVX SDT MVO NOV CHK.p. lithium - SQM AONE ULBI. Healthcare - NVS LLY GSK MDRX SEM. MATS - SCCO AVL. Defense - RTN GD. Telecom VZ T. Consumer - DRI GLS KFT ABL PM . Tech - UMC EMC QCOM. REITs ACC BIP. others on my reach list: ACW LMT ARLP EOG LMT ARLP LTE ALXN OKS SXL TLP TNH UTG .....mouse lol