The S&P 500 “Death Cross” may not be as sinister as it looks, analysts say

By Saqib Iqbal Ahmed and Terence Gabriel

NEW YORK (Reuters) – Tariff sales on the US stock market face another concern. Although the “Crucifixion of Death” pattern, history shows that ominously sounding technical signals do not necessarily mean that they face more important drawbacks.

Deathcross occurs when the 50-day moving average (DMA), which engineers consider to be a medium-term trend proxy, falls below the 200-DMA, a proxy for long-term trends. Technical analysts view this outbreak as marking spots where short-term fixes could turn into long-term downtrends.

The S&P 500’s 50-DMA finished at around 5,748 on Monday, with the 200-DMA finishing at almost 5,754. The benchmark stock index ended on the day that rose 0.8%, but the session marked the first fall of a medium-term measure below the long-term trend since February 1, 2023.

This follows the recurrence of the deaths of Nasdaq composites on Wednesday.

“It’s a very ominous sounding signal on the stock market, but when you actually backtest the Cross of Death throughout history, you’re better off from the buyer than the seller of the Cross of Death.”

Looking back at about 50 years, the S&P 500 saw 24 death crosses. In 54% of cases, death cross occurred after the point of the index’s maximum day China decline, and a Reuters analysis of LSEG data was shown.

In 46% of cases, the selloff was exacerbated as the benchmark index recorded an average decrease from 19% death points.

Signals were followed by cases of severe losses. After his death in 1981, 2000 and 2007, the final decline in subsequent sales was 21%, 45% and 55%, respectively.

The S&P 500 fell 52% 20 days after the death cross occurred, with an average loss of 0.5%, and Paul Ciana, technical strategist at Bank of America, said in a memo analysing data for almost 100 years.

However, 30 days after the signal, the index was high at 60% of the time, with an average gain of 0.8%, Ciana said in a memo on Monday.

The severity of the selling that the market has already endured – the S&P 500 came within about 1%, which confirmed a 20% revision this month – and said highs hit various measures of bearish sentiment, including hints that the sales crescendo might have ended, including CBOE’s volatility index.

“Last week there were major signs of surrender in the wider market,” Turnquist said.