We decided that it was time to come up with a name for Silver Cross Index and Golden Cross Index crossovers their signal lines. We've noticed that Silver Cross Index crossovers are excellent flags to intermediate-term changes in direction.
We've decided to name these crossovers "Shifts" -- a "Bear Shift" for a downside crossover of the signal line and a "Bull Shift" for an upside crossover. These crossovers 'shift' the character of an index, sector or industry group from bullish to bearish or vice versa.
Today, we had a Bear Shift on the SPY, S&P 600 (IJR), Nasdaq Composite (ONEQ), Dow Industrials (DIA), and the S&P 100 (OEX). The Nasdaq 100 (NDX) has already seen a Bear Shift of the Silver Cross Index.
On the chart below, we've marked some of the most recent Silver Cross Index (SCI) crossovers on the SPY. Remember, we use a vertical red dotted line to indicate major market tops and a green vertical dotted line to denote major market bottoms. These downside Bear Shifts have been quite prescient.
With participation dropping off the map for %Stocks > 20/50/200-day EMAs, the Silver Cross Index will continue to decline as it measures how many stocks have a 20-day EMA above their 50-day EMA. Therefore, those %Stocks > 20-/50-day EMAs need to at least be close to the Silver Cross Index percentage in order to see upside movement.
Conclusion: Direction changes are important on the Silver Cross and Golden Cross Indexes, but crossovers are particularly important. Today's Silver Cross Index "Bear Shift" suggests we are in for more than a short-term decline.
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