STOXX Europe 600 Index Forms Golden Cross Signal
The STOXX Europe 600 Index’s (SXXP Index) 50-day simple moving average crossed above the 200-day simple moving average on Aug. 8, forming a so-called Golden Cross. A Golden Cross signal occurs when the 50-day simple moving average crosses above the 200-day. This Golden Cross, and its popular bearish cousin the Death Cross, which occurs when the 50-day crosses below the 200-day, are signals used to help time entry and exits, as well as filters for other types of analyses, both technical and fundamental.
Bloomberg Tradebook analyzed 10 instances of Golden Cross signals dating back to 1998 and found that six instances (the seventh is currently playing out) had positive returns 20 days out, averaging 2.9 percent. We chose 20 days to approximate the number of trading days in one month.