By Larry Benedict, editor, Trading With Larry Benedict

It only took 47 days for the S&P 500 to fall into a bear market.

At the low on April 7, the S&P was down 21% from the peak on February 19.

The stock market has taken out major support levels along the way. That’s important because support levels are price points that a stock typically won’t drop below. One important level is the 200-day moving average (MA).

Prior to this pullback, the S&P has crossed below the 200-day MA just twice since the start of 2023. But now, the S&P has fallen further below its 200-day MA than at any point since 2022.

The sustained move lower is triggering one ominous signal – the “Death Cross.” It hasn’t happened in over three years.

But the last time we saw this signal in early 2022, the S&P went on to lose another 14%.

So let’s unpack the S&P 500’s Death Cross and see what it means for the market looking ahead…

The S&P 500’s Death Cross

Market jargon is full of terms to stoke fear and greed among investors.

The Golden Cross, Hindenburg Omen, and Hanging Man are just a few names given to technical indicators tracking the stock market.

The Death Cross is yet another. It occurs when the 50-day MA crosses below the 200-day MA.

The 50-day MA is an indicator of intermediate-term price trends, whereas the 200-day MA is a longer-term measure.

Investors pay close attention to when the S&P’s price crosses above or below each of those moving averages.

A crossover of one moving average over another is a rarer occurrence. It requires a more sustained price trend in one direction… or a sharp move in a short amount of time.

The quick drop into bear market territory was enough to trigger a Death Cross for the S&P 500 on April 14. You can see that at the arrow in the chart below.

So let’s look at the market behavior you can expect when the Death Cross shows up.

The name can be misleading… and its appearance can actually be great news for traders…

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A Mixed Track Record

While the Death Cross makes it sound like dramatic pain is ahead, the historical evidence going back to 1950 is mixed.

Sure, a big fall may be near. Before the pandemic, a Death Cross saw the S&P 500 go on to fall another 10.4% on average.

Some nasty drawdowns support that figure – like the 2008 financial crisis and the 1970s stagflation period.

But six months from the date of a Death Cross, the S&P’s performance has been mixed historically. The index has a slight gain on average and is up 55% of the time (or lower in 45% of past instances).

There are two takeaways from this data.

First, it’s common to see the S&P 500 fall further after a Death Cross in the near term. So now is a time to be wary.

Second, the results are not entirely doom and gloom six months out. So there’s no need to panic just because of this one signal.

All the same, the period following a Death Cross can be quite volatile. And that’s great news for traders who can capitalize on the whipsaws in the stock market.

It’s the type of trading environment where I thrive.

That’s why I want to help you take advantage of this period rather than feeling like you’ve got to sit on the sidelines until everything calms down.

I’ve profited during these wild periods over my 40-plus-year career. And now I’m helping my subscribers do it too. Just this year, I’ve recommended plays that gave my followers a shot at 18.5% in a day, 27.5% in a day, 23% in three days, 22.6% in three days, 25.6% in 19 days, 10.6% in two days, 31% in four days, 23.1% in five days… and so on.

We’ve had even bigger wins as well. But truly, if you can just stack up steady gains like this, you don’t even need to shoot for the moon.

That’s why I plan to discuss my strategy for profiting in these moments just a couple of days from now. On April 23, at 11 a.m. ET, I’ll talk about more of the reasons for the volatility we’ve been seeing… and why the chaos isn’t going away anytime soon.

So please consider joining me then. To RSVP, all it takes is one click to add your name to the guest list. Then, I’ll make sure you get all the details you need to know.

Rest assured, while Death Cross headlines may keep investors on edge, I’m looking forward to more opportunities ahead.

Happy Trading,

Larry Benedict
Editor, Trading With Larry Benedict