Alexander Green has a new “special report” out to lure subscribers to a letter I haven’t seen before called The True Value Alert — Green has been the head honcho at The Oxford Club for a long time and has put out a bunch of interesting ideas (and has some refreshingly stable and non-hypey stuff like the Gone Fishin’ portfolio), so I thought I would find out what this new bit is he’s touting.
The newsletter is expensive — like all of them are almost all the time, it’s “on sale” at a discount (normally $4,500, now $1,250), and it seems that he’s largely focused on finding stocks that have some sort of “trigger” but that are also value-priced. Or at least, that’s what they’re teasing for this first promo.
Here’s how they put it on the order page:
“✓ Urgent Special Report: “Ride the 2014 Golden Cross Surge”
“Right now, Alex is recommending a company that is severely undervalued, despite having a breakout year financially. Some of the biggest Wall Street firms have noticed and are starting to take very large positions in the company. When this stock hits its Golden Cross and surges up to its true value, a few people are going to make a lot of money.”
So … you can see why that catches investors’ attention.
What’s a “Golden Cross?” It’s one of the more well-worn technical indicators — the usual interpretation is that it’s when the 50 day moving average line crosses over the 200 day moving average line, which is a graphical representation of a stock that was down for a pretty substantial period but is gradually and pretty consistently moving up in the last few months — the stock has recently had an improving average price. (The “Death Cross”, by the way, is the opposite — the short term average crosses below the long term average).
There are lots of variations of these, many folks argue that different time periods are better or dispute the time frames used (there’s an interesting analysis of that by Barry Ritholz here, from back in early 2012 when the S&P 500 was about to have a golden cross, and a look at different kinds of moving averages from last year here), or that different kinds of moving averages are better (exponential versus simple, etc.).
And, frankly, there’s a lot of suspicion about it in many cases — it does seem to be a good general indicator for markets on average, meaning it’s better than a coin flip in determining the market direction for the next six months, but that doesn’t mean it is infallible or that it always works for broad markets or for individual stocks — there was a piece in the FT a couple years ago when their market (the FTSE 100) was hitting a golden cross as well, and the pundit said that “Golden crosses have a 100 per cent success rate during bull markets and a 100 per cent failure rate in bear markets.”
But what precisely is Alexander Green touting? Well, he’s tellng us not that a golden cross has hit which will make a stock likely to move up for the next six months — but that a cross might be about to be made by a stock he likes on or near August 29.
And they provide a dozen or so examples of stocks that made “golden crosses” in recent years and went on to huge returns — but you, of course, are wise enough to know that almost any idea can be cherry-picked… just find a few great stocks of the past few years and see which ones made a “golden cross” first, and show readers those charts. When you see a dozen charts, the thinking goes, you’re not thinking about the other dozen “golden crosses” they probably found where the cross “failed” and the stock went down and the copywriter wisely left them out of the ad. The implication of most of these ads is that THIS NEWSLETTER picked those stocks at the time (Conn’s in 2011, SunEdison in late 2012, Rite Aid in early 2013 are a few of the examples), but most of the time that’s not true — they don’t lie, but they don’t whack you over the head with the fact that these are not recommendations they made… they’re usually just examples of what might happen or what could have happened. (Though in this case they do say one of these was a pick of Alex’s — “Alex made a similar call last year that could have turned $10,000 into $46,000… in only two months.”)
So what do they think you should do?
“The steps you should take are clear…
“1) Find a stock that’s about to experience a Golden Cross.
“2) Get in before the event occurs.
“And 3) Collect a huge payday….
“Alex has spotted the potential for not one, not two, but THREE Golden Crosses… the first expected to hit within the next few weeks.”
I’ve never heard of someone trying to anticipate a “golden cross” several weeks before it might happen, but I guess there must be chart-searchers who do just that. This stock has likely already released earnings, so it’s probably not a big event like a quarterly release that’s going to move the shares at the end of August (not many companies report in late August), presumably they just think the trend of a stock’s generally increasing shares is going to continue.
Predicting a golden cross even further into the future than that, like the other two must be, seems awfully foolhardy, but if you like this indicator than perhaps finding stocks where it’s getting close and putting them on a watchlist is a reasonable thing to do — remember, though the Golden Cross is still pretty widely accepted to be predictive to at least some degree for the broader markets (whether it’s predictive for individual stocks is much messier), a stock almost but not quite having a golden cross probably has no predictive power at all… at least, not that anyone has tracked very carefully.
What, then, is that first Golden Cross that Alexander Green is pitching? Let’s check our clues:
“…when Alex showed me the effect of Golden Crosses in this niche market, I was amazed. Nothing I’d ever encountered gave such predictable profits.
“Our research shows that not only can Golden Crosses predict monumental rises in stock prices… but that one particular part of the market creates the most profitable opportunities…Are you getting our free Daily Update
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