Golden cross ....a golden rule...

Stock markets got another bright sign here: both the Nasdaq and the S&P 500 hit a golden cross the week ending 11^th October for the first time in four years due to improvement in real economy although job condition is still gloomy but stocks touching year high due to the optimism of Federal reserve action.

A golden cross is an important technical indicator to ote the sentiments on the street when the .50-day moving average for an index crosses above the 200-day moving average.

The pattern occurs when prices over the shorter term are moving higher at a faster rate than prices over the longer-term. The Dow jone Industrial hits this benchmark on 1^st of October.It's also a bullish sign for the future, as per the charts history.

Historically, the market has performed better following these patterns than if we look at any random one, three or six-month period.Specifically, the average six-month return of the S&P 500 Index following a golden cross was 3.9 percent from 1929 through 2010, while the S&P 500's average six-month return any other time was 3.1 percent, according to Bespoke's research. The research also shows the six-month average return following the golden cross is positive 63 percent of the time.

If we look at the S&P 500 data since 1972, the S&P 500 outperformed its average for the year as well, rising 11.9 percent on average in the year after a golden cross, versus 7.9 percent on average.

For the Nasdaq the six-month results have been positive 83 percent of time following the golden cross since the index began in 1971, with the Nasdaq averaging 8.7 percent in the six months after a golden cross, versus the typical average gain of 4.2 percent as per historical behavior.

If we look at the S&P 500 data since 1972, the S&P 500 outperformed its average for the year as well, rising 11.9 percentage point on an average in the year post the golden cross, versus 7.9 percent on an average.

The reverse of the golden cross is the death cross, which got real attention in july when index were close to it .It is treated as a bearish signal for the market. Since then, the S&P 500 has risen more than 15 percent, it's not unusual for the market to go up following a death cross.