Death Cross: Not A Good Day For The So-Called "Risk" Trade

Follow The Money:

One of our most important roles in developing sound investment themes is to follow the flow of capital around the globe. We first turned bearish on dollar denominated assets in the first week of May when the euro, sp500, crude oil, copper and a slew of other dollar denominated assets violated key technical levels. After a brief rally in the first two weeks of June, it now appears the downward bias has returned.

Technical Damage- Death Cross:

A death cross is an important technical indicator that occurs when, A short term moving average (i.e. 50 DMA) undercuts its longer term moving average (i.e. 200 DMA line). Normally, a death cross has overtly bearish ramifications and suggests lower prices will follow. That said, the fact that the 50 DMA line already undercut the 200 DMA line in Copper, Crude Oil and the NYSE composite bodes poorly for the ongoing economic recovery:   

Copper - Death Cross 50 DMA line undercuts 200 DMA line
Copper - Death Cross 50 DMA line undercuts 200 DMA line

Crude Oil- Death cross- 50 DMA line undercut its 200 DMA line
Crude Oil- Death cross- 50 DMA line undercut its 200 DMA line

2010 Lows Are Support:

 The Dow Jones Industrial Average & The Benchmark S&P 500 index and Nasdaq composite (not shown) are currently retesting their 2010 lows. As long as these lows hold, the current trading range remains intact. However, if the lows are breached, odds favor lower prices will follow. In addition, it is important to note that their 50 DMA lines are about to undercut their longer term 200 DMA lines which, as we now know,  is not a “healthy” sign. It is also worrisome to see that other capital markets have hit new 2010 lows which suggests the bears are getting stronger (i.e. EUR/GBP, EUR/JPY, and EUR/CHF are already at fresh 2010 lows):   

S&P 500 retesting 2010 Lows
S&P 500 retesting 2010 Lows

Dow - Retesting 2010 lows
Dow - Retesting 2010 lows

Ready For Change?

Inquire Today About Our Professional Money Management Services:
If your portfolio is greater than $250,000 and you would like a free portfolio review, 
Click Here to learn more about our money management services.   * Serious inquires only, please.

Similar Posts

  • $10,000 Best Idea Contest

    Do You Have What It Takes?  1. Enter Your Single Best Trading Idea Right Now 2. Tell Us Why 3. The Best Idea Will Win $10K [contact-form][contact-field label=’Name’ type=’name’ required=’1’/][contact-field label=’Email’ type=’email’ required=’1’/][contact-field label=’Website’ type=’url’/][contact-field label=’Comment’ type=’textarea’ required=’1’/][/contact-form]       Join Our Newsletter   *Contest Rules: 1. You must be over 18 yrs old. No…

  • Bulls Gobble Up Stocks As Volume Recedes

    The major averages advanced on Wednesday as the greenback slid to a 14-year low against the yen after the latest round of economic data was released. As expected, volume, a critical component of institutional demand, was lower than Tuesday’s levels ahead of the the Thanksgiving day holiday. The stock market will be closed on Thursday and is slated to close early on Friday (1pm EST) in oberservence of the holiday. Advancers led decliners by over a 2-to-1 ratio on the NYSE but trailed by a narrow margin on the Nasdaq exchange. There were 22high-ranked companies from the CANSLIM.net Leaders List making a new 52-week high and appearing on the CANSLIM.net BreakOuts Page, higher from the 12 issues that appeared on the prior session. In terms of new leadership, it was encouraging to see new 52-week highs outnumber new 52-week lows on the NYSE and Nasdaq exchange.

  • May 2010 Stock Market Commentary

    Sovereign debt woes continue to be the bane of this rally. At the end of April the S&P Rating Agency downgraded Greece’s debt to “junk” status, which accelerated the steep sell-off in the euro and sent it down to its 2008 lows! This sparked a world-wide panic sell-off which sent stocks plunging. In addition, Spain and Portugal’s debt was also downgraded which put pressure on a host of capital markets. Italy and Iceland are the two nations which analysts believe are also dealing with ominous debt levels. All of this helped the US dollar enjoy one of its strongest gains against the euro in over a year. Since November, the greenback has rallied smartly and jumped above its 50-day moving average (DMA) and 200 DMA lines. As expected, the stronger dollar sent US stocks and a slew of commodities (i.e. dollar denominated assets) lower as investors continue to debate our economic future.

Leave a Reply

Your email address will not be published. Required fields are marked *