DOES DEAD CROSS MEAN ANYTHING?

Yesterday finally US and European markets rallied, but technician showed a big red flag that Russell 200’s 50-day moving average crossed below its 200-day moving average this week, a development known as a “death cross”. They are warning for a great correction. Against this “death cross” pattern Wednesday especially DJIA was recording its best gain in more than 5 weeks. The benchmark indices broke the three losing streak pattern. Looks like this the “death cross.”

• DJIA +0.9%
• S&P 500 +0.8%
• Nasdaq +1%
• Russell +0.9%

The last couple of day’s correction increased the fear in investors, but the 2-3% drop is not a real correction. That is only a noise of the market and normal movement of the market. The correction starts from 6-7%. The Russell 2000 index has dropped 3.5% during the market’s last 3 days losing streak, more than double the S&P 500’s 1.4%. Everybody is concerned about the Russell because is down 7.4% from its 52-weeks high in March. S&P 500 and other major benchmarks which still near to record territory.

Technically the good news is that in the short view there is no resistance on S&P 500 or in DJIA. The bullish trend is still intact and has not been violated so the long side is the only side recently and close out all the concerns and fears and ignore the “death cross” concerns.

The BFM Assets Team.