“Hide!” says Charlie Parker on Citywire. “The market is facing a double death cross”.
That sounds much more than just nasty – maybe even fatal. So what’s it all about?
This one-year chart of the FTSE 100 will reveal all…
The index is shown in white. The red line is the 200-day moving average – the average price over the last 200 trading sessions. But look at the orange line, which is the 50-day moving average.
Right now, highlighted by the yellow circle, the 50-day is just crossing the 200-day. And – this is the key – it’s heading downwards through it.
For chartists, who look at price patterns not financial fundamentals, this is the pivotal indicator known as the “death cross”.
As the name suggests, it’s called a ‘death cross’ because when you see it, “bad things happen”, says Parker. The last time we saw it was in December 2007. The UK market then started tumbling. And within 15 months, the FTSE had plunged almost 50%.
Will history repeat itself? Maybe not exactly. But certainly from a fundamental perspective, we wouldn’t be surprised to see markets taking a real tumble from here, as we discussed in today’s Money Morning.
But even more interesting is that the copper price is also going through the same ‘death cross’ agonies. This could be another bad sign for UK shares – with the FTSE 100 now full of mining stocks, the UK index and the copper price have moved closely together recently. So a copper crash could be a second major ‘sell’ signal for the FTSE.