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The Stock Market's Death Cross

The 50 Day Moving Average crossed below the declining 200 Day Moving Average, which is not good, and is known as the Death Cross. It means a plunge could be coming. Since this crossing occurred last week, I have heard a number of pundits dismiss this event as overblown, and not something for investors to worry about.

Not sure what data they are looking at, but the charts we study clearly show that historically, stock prices are down substantially after this crossing occurs.

The following two charts track these Death Crosses from 1998, and in nearly every instance, stocks were down sharply after this crossing occurred. The red arrows identify when the Death Cross occurred, and the blue arrows show the decline that followed. Those blue arrows are pretty long in many cases. The smallest declines still took prices down 5 percent. Crashes occurred several times. The most recent Death Cross saw the 50 Day Moving Average drop under a declining 200 Day Moving Average, which is especially concerning.

Dow Jones Industrial Average 12-Year

Dow Jones Industrial Average 8-Year

The 50 and 200 Day Moving Averages have a lot to say about market trends. Recently, the 50 Day Moving Average stopped the early May rally, the early June rally, and now the 200 Day Moving Average has stopped the early July rally precisely, in the Industrials. In all instances, it was the moving average line that was the higher of the two that stopped the rallies.

Dow Jones Industrial Average 6-Month

The July rally started precisely on our most recent phi mate turn date. It was a nice run, but appears to be over.

We cover a host of indicators and patterns, and present charts for most major markets in our International and U.S. Market reports, available to subscribers at www.technicalindicatorindex.com.

"Bring the whole tithe into the storehouse,
so that there may be food in My house,
and test Me now in this,"says the Lord of hosts,
"if I will not open for you the windows of heaven,
and pour out for you a blessing until it overflows,
then I will rebuke the devourer for you,
so that it may not destroy the fruits of the ground;
nor will your vine in the field cast its grapes,"
says the Lord of hosts."

Malachi 3:10, 11

Check out our Summer Specials, including a fabulous 9 month offering, only $199, or 2 years for only $459 at www.technicalindicatorindex.com. We also offer a budget friendly 4 months for just $99 deal this week.

 

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