The S&P 500 and Nasdaq 100 both flashed the dreaded “death cross” formation on Monday.
The technical sell signal occurs when an index’s 200-day moving average rises above its 50-day moving average. It can signal a reversal in a prior trend — in this case, the two-year bull market in stocks.
The development comes on the heels heightened volatility in recent days, which saw the S&P 500 fall 11% in just two days and flirt with bear-market territory before posting a historic 10% single-day gain the following week.
Resulting price action saw the 50-day moving average fall to 5,747, just a few points below the 200-day moving average of 5,753, at a certain point on Monday.
This is the first time the S&P 500 has flashed a death cross since March 2022, the early days of a bear market sell-off sparked by surging inflation and interest rates. The index went on to decline by as much as 16% before finding its bottom in October 2022.
For the Nasdaq 100, the 50-day moving average fell to 20,214 on Monday, slightly below the 200-day moving average of 20,253.
For the Nasdaq index, it’s the first death cross since March 2022. The gauge went on to decline by as much as 27% before finding its bottom in October 2022.
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That’s not to say that the stock market has to go lower since the death cross flashed, as there have been plenty of head fakes in the past for the signal. That happens when the S&P 500 rebounds and resumes its uptrend higher, quickly flipping back to a “golden cross” buy signal.
The most recent death cross head fake occurred in March 2020.
As Ari Wald, head of technical analysis at Oppenheimer & Co., explained to BI last month: “While every major decline starts with a ‘death cross’ not every ‘death cross’ leads to a major decline.”
In the short term, the market could bounce higher amid the tariff uncertainty. That’s according to technical analyst Katie Stockton of Fairlead Strategies, who said in a Monday note that downside selling has hit exhausted levels.
“Short-term momentum has improved enough behind the S&P futures to generate a daily MACD ‘buy’ signal,” Stockton said. “This supports a bigger relief rally that has the potential to stay with the market for a few weeks.”
Still, other notable death crosses have been flashing across markets in recent weeks. The bearish signal hit bitcoin earlier this month and Nvidia in late March.
Since those signals flashed, bitcoin is up roughly 1% while Nvidia is down 7%.
