There must be a death cross at some point before every bear market, but it’s such an erratic signal that one could get 10 false signals before a meaningful one arrives. If something only works 1 out of 10 times is it really worth monitoring?
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In a sideways market there are likely to be lots of crosses back and forth and when a cross occurs late in an intermediate cycle the odds of it producing a false signal are high. That’s the current situation in gold right now. Gold is 28 weeks into its intermediate cycle. It’s oversold and due for an intermediate rally. This is one of those times where a death cross is likely occurring right as the bottom is being put in.
A more reliable signal is a cross on the weekly charts. There are a lot fewer false signals on the weekly charts. The weekly charts paint a different picture. Instead of a death cross gold has completed a golden cross, usually a sign that a new bull market has begun
The crossing of the 50-day moving average below the 200-day moving average has been long used a signal of trend change and…is known as the “death cross” and such death crosses are popping up in a large number of assets including, gold, silver, copper, bitcoin, China’s stocks, Germany’s DAX, Emerging Market stocks, bonds, and FX and, perhaps most ominously, the Global Most Systemically Import Banks (G-SIBs).
Discussing the Death Cross in a sensationalistic context is sexy and makes for good financial pornography and conversation over cocktails but that’s about all. Here’s why.