Don't Ignore This Chart!

Would a Russell 2000 Death Cross Really be Bad?


There is a lot of talk of an "impending" death cross for the Russell 2000. This event occurs when the 50-day simple moving average crosses below the 200-day SMA. While this event has triggered a couple of good signals over the last 20 years, the majority of signals have not been very good. The chart below shows these two moving averages in the main window and the Russell 2000 in the lower window. There were two bogus death crosses in the run up to the 1998 peak and three bogus crosses in the run up to the 2007 peak. We have seen two death crosses since 2010 and neither resulted in a major bear market or significant decline. In fact, these so-called "death crosses" actually marked good entry points during bull markets. One of these death crosses will eventually coincide with a bear market, but it is not a very reliable indicator when used on its own. 

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Arthur Hill
About the author: , CMT, is the Chief Technical Strategist at Focusing predominantly on US equities and ETFs, his systematic approach of identifying trend, finding signals within the trend, and setting key price levels has made him an esteemed market technician. Arthur has written articles for numerous financial publications including Barrons and Stocks & Commodities Magazine. In addition to his Chartered Market Technician (CMT) designation, he holds an MBA from the Cass Business School at City University in London. Learn More
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