The article explains that while a Golden Cross (50-day SMA crossing above the 200-day SMA) is usually seen as bullish—and a Death Cross as bearish—the real meaning depends on where price is located at the moment of the crossover. This is based on Tom McClellan’s idea of rainbow convergence.
Two Types of Crossings
1. Type 1 Crossing
Price is far away from the moving averages at the moment they cross.
The crossing usually marks a reversal point, at least temporarily.
Example: March 2022 Death Cross
– Instead of falling immediately, price reversed upward ~11% before eventually turning down again.
2. Type 2 Crossing
Price retraces back toward the point where the moving averages cross.
After retracing to that level, the prior trend usually resumes.
Acts more like a continuation signal.
Key Insight
The bullish or bearish meaning of a Golden or Death Cross depends not on the cross itself, but on price behavior relative to the crossing point.
Current Example (Feb. 2, 2023)
The Golden Cross occurred exactly at a short-term top.
Price reversed downward afterward → behaving like a Type 1 event, rather than a bullish continuation.
Broader Point
This principle works with other moving-average pairs as well. Before assuming a Golden/Death Cross is bullish or bearish, check price distance and position at the time of the crossover.
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