The “death cross” is an event that often predicts a downward trend in the market, and all three indices have created one. But can it really be a Positive development?
You know, you would think something called a “death cross” would be a bad thing …
And for the most part, you’re right.
Death Cross – The sensational term where a stock’s short-term moving average crosses below its long-term moving average in a technical chart– It’s almost always a bad thing. This often means that there will soon be a drop in a stock or index, maybe even a big sale.
Unless you’re short on stocks, that’s a bad thing … which is why it’s worrying that the S&P 500 is exactly experiencing a death cross.
Now that it’s happened, people are a little scared. And they should be, right?
I mean, there’s no way it can ever be considered a good thing, right?
Death Cross: Good or bad for investors?
I know we’ve done the analogy before, but in every bad event that has ever happened there is something positive that can be derived from it.
You know, the proverbial silver lining.
Of course, I understand that it is difficult to see in today’s market conditions any money coverage. As inflation rages (and the Federal Reserve hesitates to raise interest rates), the silver lining tends to look as dark as the clouds themselves.
However, there are silver linings … if you can focus long enough to identify them.
So, I’m going to go out here and say something that not many people will say: This S&P death cross is a good thing.
Good kind of.
Listen to me to the end.
Yes, definitely, in the short term, a death cross is less good when trying to make money in the markets. I would never deny it.
However, this is a shortsightedness.
When you step back a little and really look at the big picture, fill in our current scenario in a year from now, it’s a much different scenario.
How a death cross can be a good thing
In fact, you may even want to go the opposite route and loaded On S&P stocks as the rest of the world can nonLoad them.
Because historically, the S&P tends to come back during the 12-month period after the day’s initial business closure when the death cross occurs.
Again, it’s not me just pulling an arbitrary idea out of nowhere; This is based on historical data showing that in the 53 times the S&P index has moved to dead-end territory, the average increase 12 months later is 6.3%.
Of course, many of these increases depend on how long the index is in a downward trend of this death cross pattern, which typically stands at about 155 trading days on average.
However, the yields to do Necessarily appear.
In fact, the last time the index closed in death zones was back on March 30, 2020, during the worst point of the epidemic when the entire country was gripped by panic, fear and uncertainty.
12 months after that death cross, the S&P has risen more than 55%!
Now, remember, this was not the same economy as the one we have now. It There has been a forced withdrawal due to the advent of COVID-19, so the comeback may not be as massive as it was in 2020-202 – but there will be a comeback.
This means that investors who know this will buy if a massive sale happens because they know what will happen a few months later.
And as long as companies’ profits are still growing – and most indications are that they will – stocks will eventually grow again as well.
It just takes time, as with anything.
The question is: which side of the line will you stand on?
“The vast majority of people are comfortable with consensus, but successful investors have the opposite tendency.” Seth Kellerman
Was The S&P’s “Death Cross” Event A GOOD Thing? Source link Was The S&P’s “Death Cross” Event A GOOD Thing?