Death Cross: More Than Meets the Eye in Market Signals

Debunking the Myth: The Death Cross Signals More Than Just a Bearish Market

People who cannot recognise a palpable absurdity are very much in the way of civilisation.

Agnes Repplier

Unveiling the Illusion: Death Cross and the Quest for Market Advantage

Updated Oct, 2023

We’ll delve into this topic through a historical lens for two compelling reasons. Firstly, history serves as a profound teacher, enabling us to avoid the repetition of past mistakes. Secondly, this pattern has manifested itself numerous times in the past, offering a real-time window into our previous actions. By scrutinizing history, we can uncover invaluable insights into how we’ve navigated similar scenarios in the past and apply those lessons to our present understanding.

A common thread emerges in our quest for an edge in financial markets—many readily available tools fall short of providing a significant advantage. The allure of an indicator lies in its simplicity, with the assumption that ease of use equates to an edge over the masses. However, the truth often eludes many; they are, in fact, part of the very herd they aim to outsmart.

Recently, there has been a resurgence of chatter surrounding the “Death Cross.” First, it haunted the Dow, and now discussions have shifted toward the U.S. dollar. Despite the intriguing moniker, it remains largely worthless. Both the “Death Cross” and the “Hindenburg Omen” dazzle with catchy names but ultimately offer little tangible value. Their simplicity makes them easy to master, rendering them ineffective for those seeking a genuine market advantage.

For those unacquainted with the term, the Death Cross is a technical indicator triggered when an index or stock’s 50-day moving average dips below its long-term counterpart, typically the 200-day moving average. The doomsayers would have you believe the world is on the brink of disaster. Predictably, they emerged from the shadows when this event unfolded earlier this year, sounding the alarm. Much like a broken clock, they appeared right briefly, only for reality to shatter the illusion. When the market reversed its course, they hurried back into obscurity.

It’s now up to you to decide: does the Death Cross signify impending catastrophe or hidden opportunities? The answer may lie in your perspective and ability to separate myth from reality in the complex world of financial markets.


Don’t Fear the Death Cross: A Caution for Investors

Death Cross in 2015 buying opportunity for the Dow image


There’s no imminent danger or cause for fear when we examine this situation. Succumbing to fear leads to paralysis, often resulting in failure and loss rather than rewards. To be fair, if you’re exceptionally agile, you might profit from shorting the markets, but that’s easier said than done, especially given how rapidly markets can reverse course.

Let’s take the Dow as an example. If one were to short the Dow based on the so-called “death cross pattern,” the results, in most cases, would be less than ideal. You might have entered the market based on the signal, but when would you receive the signal to exit? If you weren’t swift or waited for a trigger to negate the “death cross,” you would have missed out on potential gains. This is assuming you managed to enter at precisely the right moment the signal was triggered.

We believe your time would be better spent compiling a list of stocks to buy, as the potential gains from buying typically outweigh those from shorting. History supports this notion, as markets tend to trend upward over time, not downward.

At Tactical Investor, we view the Death Cross as a buying opportunity. It’s a moment to uncork a bottle of champagne and celebrate, even when the majority is chanting doom for the markets. It’s essential to grasp that disaster often conceals an opportunity, and the majority rarely finds themselves on the right side of the markets for any extended period. So, rejoice when panic abounds, and be cautious when the masses are exuberant.

Navigating the Death Cross: A Stock Market Update, April 2020

In financial markets, it’s understood that market crashes are an inevitability. Equally certain, though often overlooked, is the prospect of a significant recovery. This recovery phase not only mends the wounds inflicted by the crash but propels the market to new heights. The catch is that most people tend to fixate on the downward trends, believing it’s not the right time to buy or that this time is somehow different, a perspective laden with misconceptions.

When markets eventually mount a triumphant rally to new record highs, these same individuals, much like bewildered penguins, will look back in astonishment at their hesitance. The unfortunate truth is that they’ll inevitably make the same vows once more, reacting in a similar fashion, inadvertently embodying the essence of insanity—repeating the same actions while vowing never to do so.

So, as we delve into the intricacies of the Death Cross and assess the stock market’s current status in April 2020, let’s remember that market dynamics are multifaceted, and a broader perspective can help us navigate the turbulent waters of financial markets.

Amidst the hysteria of the coronavirus pandemic, a lifetime buying opportunity emerges. It’s crucial not to succumb to fear but, instead, to concentrate on the opportunities it presents.


Conclusion: Deciphering the Death Cross: Where Opportunities Thrive Amidst Chaos

One striking realisation stands tall as we conclude our journey through the enigmatic world of the Death Cross and its influence on market dynamics. In the grand tapestry of civilization, those who possess the discerning ability to recognize palpable absurdities play an integral role in its evolution. The belief that history is a cyclical narrative is not a mere theory; it’s a fundamental truth that holds the key to our understanding.

Our exploration into the historical context of the Death Cross reveals a captivating paradox. While the masses may succumb to market hysteria, those who remain astute observers discern the opportunities that lurk within the chaos. They understand that, like the ebb and flow of civilization, financial markets have their own rhythm, a rhythm that can be danced to by shrewd investors.

In the face of fear and uncertainty, we urge you to embrace the power of discernment. The Death Cross, despite its association with turbulence, is also a gateway to untapped opportunities that lie beyond the initial storm. By maintaining a balanced perspective, you can confidently navigate the ever-changing financial landscape, ascending above the masses and embarking on a path toward financial success.


A hallucination is a fact, not an error; what is erroneous is a judgment based upon it.
Bertrand Russell

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