The S&P 500 is trading close to an all-time high and there are a few technical indicators that could be worth paying close attention to.

April saw one particularly important development – a so-called golden cross.

What’s a Golden Cross?


A golden cross occurs when the 50-day simple moving average crosses the 200-day moving average, which technicians usually see as a pretty bullish signal that short-term gains are going to last.

The golden cross has happened for the S&P 500 on several occasions over the last few years, but this time it’s happening when both the SMAs are moving up.

And this is the first time since 2010 that we’ve had this type of bullish golden cross.

In those six years, the index has risen 75% - hence the excitement about this move.

According to the WSJ Market Data Group, as noted by MarketWatch, there have been 23 golden crosses since 1970.

It’s not just the S&P 500 that’s moving – the Dow Jones industrial average also produced a golden cross in April – US stocks are benefitting from the Federal Reserve’s dovishness as it backs away from raising rates again.

Narrow Range


But many analysts are exercising caution as for many this golden cross comes at a time when a seven-year bull market is running out of steam.

The index has been trading in a very narrow range for the last two years and it’s perhaps no coincidence that this lack of velocity has been in play ever since the Fed dialled back asset purchases when it wrapped up QE3.

Even with the plunge in Q1 and last summer’s China-inspired turmoil, the S&P 500 has been trapped in a sub-20% range for two years – only the seventh time this has occurred since 1950.

Bears say the market has become tired and the slushiness is proof of this; bulls see the golden cross as confirmation that there are fresh highs in sight after a period of relative calm.

The Fed, Always the Fed


The elephant in the room in all of these technical debates is the Fed. If the central bank gets more hawkish and tightens again this year, many see a potential crunch for equities, which have been buoyed by loose monetary policy since the financial crisis.

Expectations for the Fed to raise rates are being pushed out – fewer hikes and even more slowly seems to be the message from policymakers as they are worried about America’s fragile recovery. Despite a jobs boom, growth is slowing; despite rising household income, spending is stalling.

Markets are increasingly pricing out a rate rise this year, even as policymakers stick to their 2 hikes plan. So far only Esther George of the Kansas City Fed has been pushing for an increase in the fed funds rate early - a lone hawk in a flock of doves.

Whether Fed officials pare back their plans to tighten again this year or decide to press ahead and raise rates will have huge consequences for US equities - arguably much more than any golden cross.