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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

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