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S&P: The 'Ultimate' Death Cross

ByDoug Short
Published 07/18/2012, 10:46 AM
Updated 07/09/2023, 06:31 AM

James Ross, the University Architect at UNC Wilmington and an astute observer of the economy, called my attention to an amusing Business Insider piece published yesterday: The S&P Is On The Verge Of The Ultimate Death Cross. The piece mentions a note published Monday by Societe Generale analyst Albert Edwards, who points out that the S&P is on the verge of an "ultimate" death cross.

And what, pray tell, is that? A 50-200 month moving-average crossover, based on months -- not days or even weeks.

First Time For Everything
So let's check it out. The S&P 500 dates back only to March 1957. Since that time the 50-month MA has never crossed below the 200 month MA. The closest it came was the June 1978 monthly close, which gave us a 2.09 point spread between the 50-month (92.09) and the 200-month (90.00) moving average. During the 55-plus years that the S&P 500 has existed, there has never been an "Ultimate" Death Cross.

At the end of last month, the spread was a little over 11 points.
SPX: 50- And 200-Month MAs
How disastrous would a trip to the "Death Zone" be? Let's look further back in time. The chart below uses the S&P Composite data-set popularized by Yale professor Robert Shiller. It consists of the monthly averages of daily closes since 1871 -- more than 140 years of U.S. market history.
SPX: 50- And 200-month Crossovers
The annotations on the chart speak for themselves.

Latest comments

Moving average cross-overs are common technique for timing the market. A lot of people use 3 MAs but the idea of 2 crossing has merit. And the fact that the 200 month hasn't crossed the 50 month in our lifetimes may be significant. Your point about the earlier time when it crossed frequently is not very relevant because the market was choppy at that point. But when a cross happens after not happening for a VERY long time it is, at least, nominally significant. It may have some significance and may deserve more consideration than your offhand sarcastic dismissal.
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