A rare “death cross” appeared on the American stock market this week, arousing fears so that more slowdown is on the horizon.
A death cross is when the 50 -day mobile average of a stock market index drops below the average of 200 days – indicating that the momentum is weakening.
A mobile average is the average price range of an asset over a given period of time.
The model effectively indicates to investors that prices have deteriorated in a short time. The panel appeared before several major accidents, notably in 2008 and 1929.
From the bottom of the financial crisis in March 2009, the S&P 500 endured seven notable death events – and this week marked the eighth.
On Monday, the S&P 500 saw a death cross, scary investors after weeks of market volatility following Donald Trump’s tariff proposals.
A similar crossroads then occurred several days later on the composite index Nasdaq heavy with technology.
On Thursday, the industrial average of Dow Jones was to become the last major index to experience a death cross, marking the first time that the worrying signal appeared on the index since 2023.
On Monday, the S&P 500 saw a cross of death, scary investors after weeks of market volatility following the pricing proposals of Donald Trump
“As its name suggests, a cross of death is considered to be a lower technical development and is often used as an indicator pointing to more drawbacks,” said Bret Kenwell, American investment analyst at Etoro.
Many investors are already concerned about the possible effect of Trump’s pricing plans on the economy.
The billionaire Larry Fink said earlier this month that he thought that the economy has already weakened and could already be in decline.
“I think we are very close, if not a recession now,” the CEO of Blackrock told CNBC.
Although Trump has suspended larger samples for the moment, a reference rate of 10% on goods from 60 countries is still in place, which concerns investors and ordinary Americans.
But Kenwell warns investors not to panic about the indicator of the death cross which appears on the stock market.
Looking back on historical data implies that it may not be as worrying as it may seem, he said.
“Looking back on the other seven cases since 2009, we found that a month later, the S&P 500 was less than four times with a median drop of 0.9%. However, three months later, the index was higher Six times with a median yield of 5.9%.
“When you look at six and 12 months later, the data indicates a situation of similar improvement where the S&P 500 was respectively five and six times, with median gains of 10.1% and 15.5%, respectively.”
“ As its name suggests, a cross of death is considered to be a lower technical development and is often used as an indicator pointing to more drop in advance, ” said Bret Kenwell, American investment analyst at Etoro
The Nasdaq Composite saw a rare death cross this week
The Cross of Death has aroused fears that the American economy is heading for a slowdown
In almost half of the cases (three out of seven), the S&P 500 had already made its bottom for this particular withdrawal when the death cross had occurred, added Kenwell.
In addition, the largest drop after the death cross was less than 7% in five of the seven cases.
But it notes that in two cases in 2018 and 2022, the index underwent another catch -up of 11.1% and 14.5%, respectively.
And in 2022, the death cross took place on March 14, but the S&P 500 failed to get down until almost seven months later on October 13.
“The most recent death statistics of the last 15 years are not necessarily optimistic, but they hardly represent the frightening premonition that the name seems to imply,” said Kenwell.
“It is clear that this train indicator has not, even somewhat regularly, showing that actions necessarily fell from a cliff.”
This does not mean that markets cannot deteriorate from current levels, especially due to macroeconomic problems in progress, he said.
But ‘A technical death cross for the S&P 500 is not the end, completely triggered, it may seem.
