One Amazing Stock and the "Death Cross"

Last week I talked about the "death cross". This ominous sounding indicator is watched by many long-term investors. A "death cross" occurs when the 50-day moving average moves below the 200-day moving average. It sounds a little morbid, but this indicator has been useful in the past.

Let me give you some examples of the "death cross" during the past 8 years. Since 2007, there have been four times when the "death cross" has come into play. On January 14, 2008, a "death cross" was signaled and that was the start of the big downturn that lasted until July 8, 2009, when the 50-day moving average moved back over the 200-day moving average.

On July 7, 2010, the 50-day moving average once again dipped below the 200-day moving average signaling a bear trend. That signal came to an end on October 4, 2010, and proved to be more of a consolidation than a bear market.

We had to wait until August 25, 2011 for the next "death cross". This again proved to be short lived, only about four months and in retrospect, looked more like a consolidation that a bear market. That signal ended on January 4, 2012.

So what are we to make of this last "death cross", the one that occurred yesterday?

To ignore it would be foolish, as we could be heading for a pretty big correction in this market. At the very least, we could go into another consolidation. I think is somewhat unlikely given the fact that this bull market has been in place for almost 6 years and is long in the tooth in bull market terms.

The Trade Triangle technology picked up a bear signal in the DOW on Juen 30th, almost 6 weeks before yesterday's "death cross" signal. That's not to say I can't see rallies in this market, we only have to look at Monday's massive move to see what can happen when optimism and short covering come together at the same time.

Check out this stock: CMS Energy Corp. (NYSE:CMS)

I spotted this stock this morning and I really like the way this stock is set up and it looks as though we could see a 10% gain regardless of what happens to the other markets. I will be analyzing this stock along with gold which has seen a nice pop, crude oil and the Euro which gave a buy signal yesterday.

We're going to see some amazing trading opportunities this quarter!

Every success with MarketClub,
Adam Hewison
Co-Creator, MarketClub

One thought on “One Amazing Stock and the "Death Cross"

  1. Glad to hear the color changes to the SMA's are on the way. I've been using the EMA's just for contrast.


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