More losses may be ahead for U.S. stocks in the short term says "death cross'

  • Business
  • Friday, 07 Dec 2018

A trader studies charts on the floor of the New York Stock Exchange on Dec 4. - Reuters

NEW YORK: More losses may be ahead for U.S. stocks in the short term, according to an indicator with a fittingly ominous name: the death cross.

A chart pattern tracked by technical analysts and other market mavens, a death cross forms when an index's near-term moving average of daily closing prices falls below its long-term moving average as both averages are declining. The 50- and 200-day moving averages are commonly used.

On Friday, the S&P 500 Index, the U.S. benchmark for large stocks, joined the main gauge of small companies' share performance, the Russell 2000, in forming a death cross.

It occurred as the S&P tumbled another 2.3 percent for its third straight daily decline. That pushed its 50-day moving average 3.7 points below its declining 200-day moving average, resulting in the first death cross since January 2016.

The S&P is now down 10.16 percent from its record close on Sept. 20.

Historically, the death cross has indicated a further fall for the index after the pattern emerges.

For instance, a death cross appeared on the Russell 2000 chart on Nov. 14 after it had fallen 13.7 percent from its all-time high closing level reached on Aug. 31. It has dropped another 3.6 percent in the three weeks since. - Reuters

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