Technical analysts use mathematics and chart patterns to determine entry and exit points for stocks and the overall market. But math and charts do not make for compelling reading so technicians don’t get a lot of press. Nevertheless, there is one indicator that is in the headlines each time it gives a sell signal. The “death cross” sell signal occurs when the 50-day moving average falls below the 200-day moving average. Unfortunately, this indicator is reported mostly because of its name not its usefulness.

Last week a CNBC Pro posted an article titled, “The S&P 500 formed an ominous ‘death cross.’ What history says happens next.” That sounds scary and the author wrote that “It is a concerning signal that indicates the S&P 500 is losing momentum in the near term and can fall even further.” But anyone who follows the market knows that the S&P 500 has lost momentum. That’s an understatement!

Interestingly, the article gives useful statistics on what has happened after every S&P 500 death cross dating back to 1928. Twenty days after the death cross the S&P 500 averaged a mere 0.5 percent decline. Looking 40, 60, and 80 days after the death cross, the S&P 500 on average rose 0.9 percent, 2.3 percent, and 2.6 percent respectively. That’s hardly scary.

I’m not surprised by those results. In my August 2020 article titled “Meaningless Headlines” I mocked the death cross by noting that it gave a sell on the Dow Jones Industrial Average the day of the March Covid low. The market rallied nearly 50 percent before the indicator finally returned to a buy signal.

The death cross is calculated from data in the past, so when authors write about the death cross they should use the past tense. Few do.

The same applies to most analysts on financial networks. The financial news shows give helpful information, but most comments and opinions from strategists and analysts merely reflect and extend into the future what has already happened. Have you noticed how on big down days most analysts are bearish and on big up days most analysts see opportunities?

Instead of letting each day’s movement cloud your view, you’ll be better served by simply asking yourself if it is more likely that the economy and corporate profits will get better or get worse. The answer to that shouldn’t change each day.

David Vomund is an Incline Village-based Independent Investment Advisor. Information is found at http://www.VomundInvestments.com or by calling 775-832-8555. Clients hold the positions mentioned in this article. Past performance does not guarantee future results. Consult your financial advisor before purchasing any security.