By coinnews 
00:00 Jared Blikre
The S&P 500 printed its first death cross in three years on Monday. What is this trend? What does it mean for your returns? I’m Jared Blikre, host of Stocks in Translation. Let’s get to a few definitions first. And I’m going to start with the moving average. We got to know that. It’s very simple. It shows the average price over a set time, like 50 or 200 days, and it updates as new days come, come in. So basically, it’s the last 200 days closing prices. Now we can move on to the actual death cross. This is when a short-term moving average, like the 50-day, falls below a longer term one, such as a 200 day. And I’ll show an example later on, but I first want to run through some of the statistics here. This is what happens next after you get a death cross in the S&P 500 one day later, one week later, one month, one quarter and one year. And this is the median results going all the way back to 1961. And there were 32 instances, which is not nothing. So we do have a decent sample size here. And I also have the positive, the percent positive returns. So you’ll see for instance, on the first day, one day after we might expect a slightly negative return on balance and then a 47% positivity rate. Now, because stocks go up most of the time, you actually need to see something over 70 to be bullish and you just need to be under 70 to be a little bit bearish. And so this definitely qualifies as a bit bearish. You can see one week out, we still have average or median returns that are positive. In fact, they’re all, they’re positive all the way going up to one year. Why would this be? Well, sometimes you get a very fast decline, like what we had in the pandemic. And by the time you get that signal, the market is just rocketing up and you’ve already had the bottom, whereas other times, like the global financial crisis, or even in 2022, the market will take its time going down. And so when you have that death cross, it’s actually a good signal to get a little bit more bearish. Now, this is, these stats go back to 1961. I also have them going back to 1990 and they’re a little bit less bad, but I think what we want to take away from this is that the death cross itself is not really a, is not really a great trading signal. You need some other confirmation or rejection. And I’m going to close here by just looking at an example in the S&P 500. We do have the native capability to show moving averages in the YFi interactive. And there you go. We did get that death cross yesterday. And I’m just going to show you the last six years, so you can see that 2022 example happens somewhere in there and we got a decent decline off of that. Whereas in 2020, we got it very close to the bottom. And so that might have actually been a buy signal. We can also see in Tesla, Tesla just printed a very similar chart, very similar pattern. Its death cross activated only yesterday. And individual stocks trade a little bit differently than the indices. They tend to move a little bit quicker. And so if I’m trying to take trade Tesla here, I’m looking for a nice break over that 200 day moving average that is sustained, whereas if I’m looking at the indices like the S&P 500, I want to see a break above, come back down and test it, and then gently rise from there. Tune into stocks in translation for more jargon busting deep dives. New episodes on Tuesdays and Thursdays on Yahoo Finance’s website or wherever you find your podcasts.