‘Death cross’ springing up everywhere – Indicator a harbinger of bear markets
by Alexander Higgins
August 16, 2011
A sign of pending doom for stock markets – the death cross – is showing up in all major market indices which indicates an upcoming bear market and financial turmoil.
August 16, 2011
BEND, Ore. — The “death cross,” a high-profile bear-market indicator, springs up everywhere.
The death cross forms when the 50 Day Moving Average crosses the 200 Day Moving Average in a downward trajectory and is a widely followed indicator that’s commonly viewed as a harbinger of bear markets.
Last week, it flashed its warning, not only in the major indexes, but in many key sectors, as well.
Late last week, the death cross showed up in the S&P 500 , Dow Jones Industrials , Nasdaq Composite and the Russell 2000 ; in other words, all three major U.S. indexes now are in death-cross mode, signaling the increased possibility of a new bear market in U.S. equities.
In a bull market, this crossover is known as a “golden crossover” while a downside cross like the one that just occurred is known as the death cross or “dead cross.” This is a unique indicator whose validity has been statistically well proven; in fact, Dow Jones Indexes has even developed an index to track the golden-cross and death-cross action, called the Dow Jones Golden Crossover U.S. Large-Cap Total Stock Market Index.
Read about the Dow Jones Golden Crossover U.S. Large-Cap Total Stock Market Index.
This is a broad trend-following technical methodology is based on moving averages, and these crossovers have only occurred a handful of times over the past decade. While several occurrences have been whipsaws, the death cross/golden cross has nevertheless managed to identify a large part of every bull or bear market move over the past 10 years.