About this Video

• Video Title: S&P 500 notches first death cross in 3 years
• Channel: Yahoo Finance
• Speakers: Jared Blickery
• Duration: 00:03:23

Introduction

This Yahoo Finance video explains the "death cross" phenomenon in the S&P 500, a technical indicator where a short-term moving average falls below a long-term moving average. The presenter analyzes historical data to assess the predictive power of this indicator for future market returns.

Key Takeaways

• Death Cross Defined: A death cross occurs when a short-term moving average (like the 50-day) falls below a longer-term moving average (like the 200-day), suggesting a potential bearish trend.
• Historical Data Analysis: The video uses data from 1961 (and also 1990) to examine the performance of the S&P 500 after a death cross. The results show mixed short-term outcomes, with a less than 50% chance of a positive return in the days and weeks following the event. However, long-term (one year) returns tend to be positive.
• Death Cross as a Signal: The death cross alone isn't a reliable trading signal. Additional confirmation or rejection is necessary before making investment decisions. The speed of market decline after a death cross is a key factor influencing short-term results. Fast declines (like in 2020) can leave the death cross signaling near the market bottom. Slower declines may better reflect an ongoing trend.
• Individual Stock vs. Index Behavior: Individual stocks often react more quickly to death crosses than market indices.
• Example Charts: The video shows examples of death crosses in both the S&P 500 and Tesla, highlighting different reactions and interpretations.