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Zacks Investment Ideas feature highlights: SPY, SMH, Nvidia and XBI

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For Immediate Release

Chicago, IL – January 27, 2023 – Today, Zacks Investment Ideas feature highlights Spdr S&P 500 ETF (SPY - Free Report) , Vaneck Semiconductor ETF (SMH - Free Report) , Nvidia (NVDA - Free Report) and SPDR S&P Biotech ETF (XBI - Free Report) .

This "Golden" Technical Indicator Is Triggering Across the Market

What Is a Golden Cross?

Technical analysis is the best way for investors to determine potential trend changes in individual equities and equity markets. Though technical analysis can get complicated, simple and highly reliable signals exist for analysts who prefer "bar napkin" technical research. One such signal is the "Golden Cross". Golden Cross refers to the phenomenon where a faster-moving average (50-day MA is most common) crosses over a slower moving average (200-day MA).

When a Golden Cross triggers in a particular security or index, it is a signal to technical analysts that a major trend change has occurred, and the long-term trend has flipped from bearish to bullish.

Death Cross Means Caution

On the contrary, a "Death Cross" is the opposite of a Golden Cross. A Death Cross triggers when the short-term moving average (50-day MA) is above the longer-term moving average (200-day MA) and crosses below it. In March of last year, a death cross in the Invesco Nasdaq 100 ETF  was an early signal that 2022 would be a rough year for bulls.

Pros and Cons of Crosses

The Golden Cross signal has many positives, which include:

·      Ease of identification: Simply bring up a daily chart of an instrument and add the 50- and 200-day MAs.

·      Eliminates Guesswork: By becoming more mechanical, investors can evaluate trend changes based on fact, not bias.

·      A Meaningful Signal: Because cross signals are rare, they are more meaningful.  

Like all signals, crosses are not perfect. Cons include:

·      Delayed Response: Since the signal is long-term, it does usually work right away.

·      False Signals: Investors should be cautious in a sideways market, as the cross can produce false signals.

What Are the Market and Key Industry Groups Telling Us?

In general, the pros outweigh the cons for investors looking for a largely reliable long-term signal. At present, some key markets and stocks are nearing signals or have already triggered them. For example, the Spdr S&P 500 ETF, the most widely followed market ETF, is approaching a Golden Cross. A successful cross in this index would bode well for U.S. markets in 2023.

Wednesday, the Vaneck Semiconductor ETF triggered a Golden Cross. Semiconductors are a key industry group and often lead the market higher. Recent strides in AI are sending stocks like Nvidiahigher.

Another welcome sign is that beaten-down industries like biotech are now triggering Golden Crosses. The SPDR S&P Biotech ETF is the most popular ETF tracking the space. Both large-cap and small-cap biotech stocks are participating in the rally.

Breakdown

Golden Crosses and Death Crosses have proven to be reliable indicators in past years. Investors should understand the pros and cons of the signal and accept that it is not a panacea but rather an indication of a potential trend change. Looking at today's market, several important industry groups have already triggered Golden Crosses – though the most significant signal has yet to trigger. Watch to see if the S&P 500 can trigger a Golden Cross to confirm that the overall market has shifted back to the bull side.

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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performancefor information about the performance numbers displayed in this press release.

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