What is Death Cross?
A death cross is a bearish chart pattern that occurs when a shorter-term moving average (typically the 50-day) crosses below a longer-term moving average (typically the 200-day).
Death Cross Explained
The death cross signals that short-term momentum has weakened below the longer-term trend. While the name sounds ominous, death crosses don't always lead to major crashes — sometimes they occur near bottoms just before a recovery. As with all moving average signals, it's a lagging indicator best used as confirmation rather than a standalone signal.
Real-World Example
The S&P 500's 50-day moving average crosses below its 200-day moving average. Analysis of the past 50 years shows that following a death cross, the market was lower 6 months later only about 50% of the time. However, when a death cross coincides with other bearish signals, the probability of further decline increases significantly.
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