The bearish “death cross” is back…
MarketWatch reports the death cross occurs when a market’s 50-day moving average drops (and remains) under its 200-day moving average.
The cross reappeared in the S&P 500 on January 8. The 50-day remains about 3% under the 200-day today.
Now, at PBRG, we don’t trust most of the “indicators” traders use in their stock charts… but the historical track record of the death cross pattern (since 1920) is worth noting.
If an investor sold when the cross appeared and bought back in when it left, he wouldn’t have beaten the market over the long term… but he would have avoided most of its volatility.
Bottom line: As long-term investors, we don’t advocate trading in and out of the equity markets. The trading fees alone will cut down on your returns.
But you may not want to add new positions until the cross reverses…