---
created: '2025-09-11'
date: '2025-09-11'
description: bearish chart pattern when short-term moving average drops below long-term moving average, often followed by above-average returns.
id: death cross
modified: 2026-06-05 15:08:05 GMT-04:00
published: '2003-11-21'
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  - finance
title: death cross
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permalink: https://aarnphm.xyz/thoughts/death-cross.md
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---
> \[!definition\] Definition 1. death cross
>
> The “death cross” market chart pattern refers to the drop of a short-term **moving average** below a longer-term moving average. The most closely watched stock-market moving averages are the **50-day** and the **200-day**.

Despite its ominous name, the death cross is not a market milestone worth dreading. Market history suggests it tends to precede a near-term rebound with above-average returns.

> \[!tip\] takeaways
>
> - The death cross appears when a stock’s short-term moving average (usually 50-day) crosses below its long-term moving average (usually 200-day)
> - Despite the dramatic name, the death cross has been followed by above-average short-term returns many times since 1992
> - The rise of the 50-day moving average above the 200-day moving average is known as a **golden cross**

## understanding a death cross

The death cross only indicates that price action has deteriorated over approximately two months (if using the 50-day moving average crossing).

Those convinced of the pattern’s predictive power note the death cross preceded severe bear markets of 1929, 1938, 1974, and 2008. However, this represents **sample selection bias**—cherry-picking data points while ignoring numerous occasions when the death cross signaled nothing worse than a market correction.

According to Fundstrat research, the **S\&P 500** was higher one year after the death cross about two-thirds of the time, averaging a **6.3% gain**. This is below the annualized gain of over 10% for the S\&P 500 since 1926, but hardly disastrous.

From 1971-2022, the 22 instances when the **Nasdaq Composite’s** 50-day moving average fell below its 200-day moving average were followed by average returns of:

- **2.6%** over the next month
- **7.2%** in three months
- **12.4%** six months after

These returns were roughly double the typical Nasdaq return over those timeframes.

The death cross has tended to provide more useful bearish market timing when occurring after market losses of **20% or more**. However, its historical track record shows the death cross is a **coincident indicator** of market weakness rather than a leading one.

## example

In December 2018, an S\&P 500 death cross led to headlines describing “a stock market in tatters.” The index lost another 11% over the next two weeks, then rallied 19% from that low in two months and was 11% above its death cross level within six months.

Another S\&P 500 death cross occurred in March 2020 during the initial COVID-19 panic. The S\&P 500 gained just over **50%** in the following year.

## death cross vs. golden cross

The opposite of the death cross is the **golden cross**—when the short-term moving average moves above its longer-term moving average. Many investors view this as a bullish indicator.

The golden cross can indicate a prolonged downtrend has run out of momentum.

## limitations of using the death cross

If market signals as simple as the interaction between 50-day and 200-day moving averages had predictive value, you would expect them to lose it quickly as market participants tried to take advantage.

The death cross makes for compelling headlines but has been a better signal of a **short-term bottom in sentiment** than of an onset of a bear market or recession.

## faqs

> \[!question\] what happens after a death cross?
>
> A death cross is a bearish signal indicating a downward trend is likely to continue, where the asset’s price will further decline. It can also signal a reversal—an end of an upward trend.

> \[!question\] difference between a death cross and a golden cross?
>
> A death cross is bearish (signals decrease), while a golden cross is bullish (signals increase).

> \[!question\] how do you check a death cross?
>
> Technical traders use both 50-day and 200-day moving averages. A death cross occurs when the 50-day moving average crosses below the 200-day moving average.

## bottom line

The death cross is used in technical analysis to understand stock price movement, signaling when the short-term moving average has fallen below a longer-term moving average, indicating a bearish trend.