We have seen the Golden Cross Index (GCI) sitting at its “all-time high” (data since 2017) for some time. Today, it dropped a full percentage point. It moves fairly slowly, so this decline was significant in my estimation. Below, I have the Golden Cross Index chart for the major indexes. Notice all of them are extremely overbought. The S&P 600 has the healthiest as it only moving sideways. This isn’t surprising as small-caps have been outperforming the large-caps. It appears the longer-term foundation of the SPX is beginning to show small cracks. Note that cardinal tops (marked with the red vertical line) typically arrive when the GCI tops. I don’t think this is over just yet.
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Conclusion: Relative performance can help you select the strongest performers within a strong (or weak) industry group. Just remember, if the industry group as a whole is not outperforming, your confidence level should be lower even if your stock is outperforming within the industry group. Think of it this way – a stock could be in decline and still show strong relative performance to its brethren, simply because it is falling at a slower rate.
Happy Charting!
– Erin
Technical Analysis is a windsock, not a crystal ball.
Helpful DecisionPoint Links:
DecisionPoint Alert Chart List
DecisionPoint Golden Cross/Silver Cross Index Chart List
DecisionPoint Sector Chart List
Price Momentum Oscillator (PMO)
Swenlin Trading Oscillators (STO-B and STO-V)
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