At the close of trading on the New York Stock Exchange today, a key technical measure indicated that a bear market in stocks is almost mathematically certain to begin at the weekly close on Friday for the first time since August 2011. This occurred despite today’s highly positive close and very bullish finish.
In spite of the market’s initial rise during the hours following the opening bell, the market fell sharply, before making a fast, strong rally during the final hour of trading that wiped out all the previous losses. The S&P 500 Index stood at 1,987.67 as the closing bell rang, an incredible 155 points higher than its weekly low printed on Monday. The Index actually closed today just a whisker off its high for the week!
Bear Cross / Death Cross
The technical measurement that is almost certain to be achieved tomorrow is widely known as a “bear cross” or “death cross”, and is used by many fund managers and technical analysts to determine whether or not a bear market has begun. The measurement is taken by comparing the 50 day and 200 moving averages, both calculated at the closing price of the index. When the 50 day moving average crosses from above to below the 200 day moving average, it is a “bear cross” signal indicating a bear market with a downwards trend. At the
Additional Measurements
Other commonly used measurements do not yet indicate that the U.S.A. or in fact any other major economies beyond China, Canada and Brazil have yet entered bear markets. The common yardstick of a 20% fall in a major stock index has not been met by either the S&P 500 or Dow Jones Industrial Average Indices. Additionally, we have not yet had a monthly close below the 12 month moving average, let alone two consecutive such closes, which is another widely used indicator. The sharp recovery of the last two days may indicate we have not quite entered a true bear market yet, although few analysts could put their hand on their heart and call this a true bull market either.