The “Cross of Death” is an alarming sign for many investors. It is a chart pattern from the course analysis in which the 50-day average course falls below the 200-day average. Many investors wonder how they behave best in such cases.
• The technology looks back, not ahead
• Caution, but no alarm
• Preserving calm pays off
Death-Cross explains: What investors need to know
The so -called Death Cross is a technical analysis tool that should indicate potential downward trends and thus a possible introduction to a bear market. It occurs when the 50-day average cuts the 200-day average from top to bottom. It is important to note: The Death Cross is not a signal directed to the future – it is based exclusively on past course developments and therefore shows a confirmed weakness as a future development.
Historical warnings or just a panic
Analyzes show that the Death Cross is a warning signal, but the meaningfulness of which should be considered in the context of other market indicators. The Death Cross has a threatening name – but how dangerous is it really? A look into the past shows a mixed picture. The signal appeared in times of crisis such as the 2008 financial crisis or during Corona pandemic, but not always with dramatic consequences.
According to analyzes from LPL Financial, the S&P 500 rose again in over 70 percent of the cases within twelve months after a death cross – with an average return of over 6 percent. An examination of Etoro also comes to a similar result: in many cases the market had already reached its low before the signal occurred.
Nevertheless, the Death Cross remains a serious warning sign – especially when it goes with other technical weakness signals. Investors should therefore understand it as a possible indication of a changed market situation, but not as an automatic sales signal.
The conclusion: The Death Cross is neither insignificant nor a safe harbinger for a crash. It indicates that the market mood has clouded – whether this creates panic or just a breather is only decided in conjunction with other factors.
In this way, investors react correctly
Investors should urgently avoid panic sales: If the Death Cross appears, many price declines have often already been completed. Those who climb hectic at this moment realize losses that could have compensated in the long term. The stock market legend Warren Buffett has long been asking investors not to panic in falling courses. Instead of reacting impulsive, it is crucial to maintain a clear investment strategy and to see market phases with weak courses as an opportunity. Especially long -term strategies – such as ETF-Savings plans For old -age provision – should not be thrown overboard. If you invest regularly, you can benefit from lower entry prices and the cost-average effect, especially in weak market phases. Reseters can therefore also be an opportunity for discounting – and not inevitably a reason to flee.
Editor finance.net
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