And Now for Something Completely Different:
The "Ultimate" Death Cross

By Doug Short
July 17, 2012

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James Ross, the University Architect at UNC Wilmington and an astute observer of the economy, called my attention to an amusing Business Insider piece published yesterday: The S&P Is On The Verge Of The Ultimate Death Cross. The piece mentions a note published Monday by Societe Generale analyst Albert Edwards, who points out that the S&P is on the verge of an "ultimate" death cross. And what, pray tell, is that? A 50-200 moving average crossover, based on months, not days (or even weeks).

So let's check this out. The S&P 500 only dates back to March 1957. Since that time the 50-month MA has never crossed below the 200 month MA. The closest it came was the June 1978 monthly close, which gave us a 2.09 point spread between the 50-month (92.09) and the 200-month (90.00). During the 55-plus years that the S&P 500 has existed, there has never been an "Ultimate" Death Cross.

At the end of last month, the spread was a little over 11 points.

 

 

How disastrous would a trip to the "Death Zone" be? Let's look further back in time. The chart below uses the S&P Composite data set popularized by Yale professor Robert Shiller. It consists of the monthly averages of daily closes since 1871 -- over 140 years of US market history.

 

 

The annotations on the chart speak for themselves.


Postscript: Yes, the title of this piece includes an allusion to a regular Monty Python feature, a favorite of many of my fellow Boomers.

 

 

 

 

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