S&P 500 Tallies Its First ‘Death Cross’ in 3 Years. Here’s What Happens Next.


S&P 500 Tallies Its First ‘Death Cross’ in 3 Years. Here’s What Happens Next.

Recent ‘death crosses’ have painted a mixed picture about where the S&P 500 might be heading next.

By Steven Orlowski, CFP, CNPR

Recently, the S&P 500 triggered its first "death cross" since 2022, a technical chart pattern that often signals potential trouble ahead for the broader stock market. This ominous-sounding term refers to a situation in which the index’s 50-day moving average crosses below its 200-day moving average, reflecting a shift in momentum from bullish to bearish.

While the phrase “death cross” may evoke images of doom and gloom, history tells a more nuanced story.

What is a Death Cross?

In the world of technical analysis, moving averages are widely used to smooth out price data and identify trends. The 50-day moving average tracks the short- to mid-term price trajectory, while the 200-day moving average provides a broader view of longer-term price movements.

When the short-term average dips below the long-term one, it often reflects fading investor optimism. This crossover is known as the “death cross.” It's the opposite of a “golden cross,” where the 50-day moving average moves above the 200-day, typically seen as a bullish signal.

The S&P 500’s latest death cross is only the sixth such occurrence in the past 15 years, a period that includes the Great Financial Crisis, the COVID-19 crash, and the bull market rebound that followed.

Mixed Messages from Market History

The implications of a death cross are far from cut-and-dried. While it can indicate that selling pressure is building and a potential downturn may follow, it’s also known to be a lagging indicator—occurring after a significant decline has already taken place.

Here’s how the S&P 500 has historically performed after previous death crosses:

  • March 2020 (COVID Crash): The index bottomed shortly after the crossover and began a powerful rally, making the death cross a false bearish signal.

  • December 2018: The market reversed course just weeks after the death cross, launching into a strong recovery.

  • August 2015: The index remained choppy and uncertain for months, eventually recovering after brief turbulence.

  • August 2011: The S&P fell further in the short term before staging a long-term recovery.

These examples show that while a death cross can signal caution, it’s not a reliable predictor of a prolonged bear market. In several cases, it actually marked the tail end of a selloff rather than the start of a deeper plunge.

What to Watch Next

The context surrounding a death cross matters greatly. Currently, investors are grappling with a mixed bag of market drivers:

  • Inflation & Interest Rates: Sticky inflation and a hawkish Federal Reserve remain central concerns. If interest rates stay elevated longer than expected, it could weigh on valuations.

  • Earnings Season: Corporate earnings will provide crucial clues about the health of the economy and whether profit margins can withstand cost pressures.

  • Geopolitical Tensions: Ongoing uncertainty around global conflicts and supply chain disruptions adds another layer of risk.

In addition to technical patterns, investors are increasingly looking at macroeconomic fundamentals and corporate guidance to assess market direction. If the economy can avoid a recession and inflation continues to cool, the current death cross may end up as just a speed bump in an ongoing bull market.

Bottom Line

The S&P 500's latest death cross raises eyebrows, but investors should resist the urge to react emotionally. History shows that these signals are not infallible, and outcomes vary widely depending on broader economic conditions.

Rather than acting as a definitive sell signal, the death cross is better viewed as a caution flag—reminding investors to re-evaluate their portfolios, consider their risk tolerance, and stay tuned to both technical signals and fundamental developments.

In markets, as in life, the real danger often lies not in the signal itself, but in how we choose to interpret it.

Disclosure: This article is for informational purposes only and does not constitute investment advice. Always consult with a financial professional before making investment decisions.

Comments

Post a Comment

Popular posts from this blog

3 Big Energy Stocks Offering Strong Dividends Amid Volatility

Image
3 Big Energy Stocks Offering Strong Dividends Amid Volatility By Steven Orlowski, CFP, CNPR In a market marked by persistent uncertainty, rising interest rates, and geopolitical tensions, income investors are seeking stability and yield in all the right places. One sector continues to stand out: energy. While oil and gas prices remain volatile, the long-term demand outlook and disciplined capital strategies have turned several major energy companies into dividend powerhouses. Here are three energy giants offering robust dividend yields and resilient fundamentals, making them attractive options for investors seeking income and relative stability in turbulent times. 1. ExxonMobil (NYSE: XOM) Dividend Yield: ~3.4% Market Cap: $470+ billion ExxonMobil is one of the largest integrated oil and gas companies in the world. Its scale, upstream and downstream operations, and global reach offer a level of diversification that helps buffer against short-term price swings. In recent year...
Read more

Stocks making the biggest moves midday: Eli Lilly, Alphabet, Hertz, UnitedHealth and more

Image
  Stocks Making the Biggest Moves Midday: Eli Lilly, Alphabet, Hertz, UnitedHealth, and More ​ As of midday on Thursday, April 17, 2025, U.S. stock markets exhibited mixed performance, with significant movements in several key stocks. The Dow Jones Industrial Average dropped nearly 400 points, primarily due to a sharp decline in UnitedHealth Group shares. Conversely, the S&P 500 and Nasdaq Composite showed modest gains. ​ Eli Lilly (LLY) – Soaring on Weight-Loss Pill Success Eli Lilly's stock surged by up to 17% following the announcement of successful phase-three trial results for its new weight-loss pill, orforglipron. This once-daily oral medication demonstrated effectiveness comparable to injectable alternatives like Novo Nordisk's Ozempic, leading to an average weight loss of 16 pounds (about 8% of body weight) and a reduction in A1C levels by 1.3% to 1.6%. The promising results have investors optimistic about the drug's potential market impact. ​ United...
Read more

Stock Spotlight – Stock of the Week: UnitedHealth: Where Does the Company Stand After the Storm?

Image
  Stock Spotlight – Stock of the Week: UnitedHealth: Where Does the Company Stand After the Storm? UnitedHealth Group (NYSE: UNH), a cornerstone of the American healthcare industry, has weathered its share of challenges over the past year. From regulatory pressures and increased utilization costs to a rapidly evolving competitive landscape, investors have had plenty to digest. But as the dust settles, one question remains: Where does UnitedHealth stand now—and is it still a buy? A Quick Look Back: Navigating Headwinds 2024 was a turbulent year for UnitedHealth. The company faced mounting pressure from multiple fronts: Rising medical costs , particularly in its Medicare Advantage segment, dented margins. Regulatory scrutiny intensified, especially around pharmacy benefit management (PBM) practices and alleged anti-competitive behavior. The change in utilization patterns , with more seniors returning to in-person care post-pandemic, increased short-term claims expenses. ...
Read more