Wednesday , 29 May 2024

The So Called “Death Cross’ Is An Almost Completely Worthless Signal – Here’s Why (+3K Views)

There must be a death cross at some point before every bear market, but it’s such an erratic signal that one could get 10 false signals before a meaningful one arrives. If something only works 1 out of 10 times is it really worth monitoring?

The original article has been edited here for length (…) and clarity ([ ]). For the latest – and most informative – financial articles sign up (in the top right corner) for your FREE tri-weekly Market Intelligence Report newsletter (see sample here)

In a sideways market there are likely to be lots of crosses back and forth and when a cross occurs late in an intermediate cycle the odds of it producing a false signal are high. That’s the current situation in gold right now. Gold is 28 weeks into its intermediate cycle. It’s oversold and due for an intermediate rally. This is one of those times where a death cross is likely occurring right as the bottom is being put in.

A more reliable signal is a cross on the weekly charts. There are a lot fewer false signals on the weekly charts. The weekly charts paint a different picture. Instead of a death cross gold has completed a golden cross, usually a sign that a new bull market has begun

1. Gold Is the Latest Asset To Join the Global “Death Cross” Parade!

The crossing of the 50-day moving average below the 200-day moving average has been long used a signal of trend change and…is known as the “death cross” and such death crosses are popping up in a large number of assets including, gold, silver, copper, bitcoin, China’s stocks, Germany’s DAX, Emerging Market stocks, bonds, and FX and, perhaps most ominously, the Global Most Systemically Import Banks (G-SIBs).

2. Infamous Death Cross Only Makes For Good Financial Pornography! Here’s Why

Discussing the Death Cross in a sensationalistic context is sexy and makes for good financial pornography and conversation over cocktails but that’s about all. Here’s why.

3. Are “Death Crosses” Useful Indicators On When To Buy & Sell?

The “death cross” occurs when the 50 daily moving average falls below the 200 daily moving average and is seen by mainstream financial media as a BIG bearish signal. It isn’t. It is actually more often a medium-long term bullish signal than a bearish signal. Below are all the S&P 500’s death crosses that have occurred over the past 20 years and they substantiate that it isn’t a useful indicator. Take a look.

4. Pervasive Death Crosses Are U.S. Stock Market Sell Signals

Those who are ignorant of financial history are doomed again to suffer its dreadful and costly consequences and today’s death crosses as seen in 7 major stock market indices are US stock market sell signals. Take note.
Support our work: like us on Facebook, follow us on Twitter, or share this article with a friend. – Voted the internet’s “most unique” financial site! (Here’s why)