Does the SPX's death cross tell us anything about where the market might go?
First, it was the Dow. Then came the Russell 2000 Index (RUT), which was followed by Apple Inc. (NASDAQ:AAPL). Now, it's the S&P 500 Index's (SPX) turn for a "death cross," with the 50-day moving average crossing below the 200-day trendline today. Courtesy of Schaeffer's Senior Quantitative Analyst Rocky White, the data below provides insight on how the broad-market barometer tends to react after a death cross has occurred.
From the above data, we can see how the SPX has historically struggled in the immediate aftermath a death cross signal -- averaging a one-month loss of 0.7%, and positive less than half the time. This, versus a one-month anytime return of 0.7% for the SPX, which is positive 61% of the time. However, the average SPX return gets better the further removed it is from a signal.
The real concern arises when looking at the longer-term returns for the SPX in the wake of a the death cross. Going out a full year, the SPX has averaged an 8.86% anytime return, compared to just a 3.94% return post-death cross. Meanwhile, it should be noted that the SPX has come out positive 69% of the time after a signal, going out a year -- not much lower than the comparative anytime figure of 73%.
Below you can find a full list of the S&P 500 Index death crosses since 1950. There have been 32 total, with the most recent in August 2011.
