A death cross is a chart pattern used in stock trading (as well as index funds, commodities, and cryptocurrency trading) in which a short-term (e.g., 50-day) moving average (MA) crosses below a long-term (200-day) moving average. It reflects recent price weakness and signals a new bearish long-term trend in the market.
Is the death cross a market milestone?
Despite its ominous name, the death cross is not a market milestone worth dreading. Market history suggests it tends to precede a near-term rebound with above-average returns. The death cross appears on a chart when a stock’s short-term moving average, usually the 50-day, crosses below its long-term moving average, usually the 200-day.
Does the death Cross signal a downturn in a market?
The death cross "is understood to signal a decisive downturn in a market ," Investopedia says. The Dow Jones Industrial Average has just seen a bearish chart signal known as the "death cross". The last time the Dow witnessed a similar pattern was in March 2022, after which the index declined by about 12% over the next six months.
