The Golden Cross and Death Cross are two of the most widely watched trend-following signals in technical analysis. They represent a significant shift in price momentum over a medium-to-long-term horizon.
A Golden Cross occurs when a short-term moving average (typically the 50-day SMA) crosses above a long-term moving average (typically the 200-day SMA). This is traditionally viewed as a bullish signal, suggesting that short-term buying pressure is outweighing long-term historical resistance.
Conversely, a Death Cross occurs when the 50-day SMA crosses below the 200-day SMA. This is a bearish signal indicating that price momentum is deteriorating and a long-term downtrend may be starting.
While these crosses are 'lagging indicators'—meaning they confirm a trend after it has already begun—they are heavily utilized by institutional and retail traders alike to gauge the overall 'health' of a market or individual asset.