What the 'death cross' means for stocks

The dreaded ‘death cross’ was recently spotted in the S&P 500. For technical analysts, this is a sure sign to sell. But what exactly is the death cross and what does it really mean? Tim Bennett explains.

Given America is still the world's most influential economy, investors should watch its key stock index, the S&P 500, closely. The bad news is that the death cross' has just been spotted in the market. For technical analysts (chartists), this is a sure sign to sell. But what exactly is the death cross? And does it really mean what chartists think it does?

The death cross is found using two relatively simple technical indicators. You take the 50-day moving average (MA, this averages the index price over the past 50 days and so gives a short-term view of the market trend) and the 200MA (the same thing, over a longer period of time). By themselves, each is of limited use. But combined, they can reveal a lot.

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Tim graduated with a history degree from Cambridge University in 1989 and, after a year of travelling, joined the financial services firm Ernst and Young in 1990, qualifying as a chartered accountant in 1994.

He then moved into financial markets training, designing and running a variety of courses at graduate level and beyond for a range of organisations including the Securities and Investment Institute and UBS. He joined MoneyWeek in 2007.