Warning

Long-Term warning, the bearish 20/50 EMA Death Cross
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Don't let the last minute bounce or the news lull you into a false sense of security. One of the most commonly watched crossovers is the 20/50 MA and although I don't trade based on this crossover, I do give it the respect it deserves.













Take care... Jason

Added: Take a peak in the comments section below, some good stuff in there.

 

[CrabClaw]

Thanks Jason, something to watch for sure. In your research is there any instances where this made a short term reversal or does the crossover maintain itself more often than not?

 

[JTH]

Thanks Jason, something to watch for sure. In your research is there any instances where this made a short term reversal or does the crossover maintain itself more often than not?

Good question!

For the S&P 500

1960-2010, 20/50 SMA, 139 crossovers. average crossovers 2.78 yearly. Total profit 246.23%, average yearly profit 4.92%. Maximum drawdown -34.82%, Average winning trade 8.75%, average losing trade -3.45%, average trade 1.22%

1960-2010, 20/50 EMA, 113 crossovers. average crossovers 2.26 yearly. Total profit 1065.98%, average yearly profit 21.31%. Maximum drawdown -26.77%, Average winning trade 10.55%, average losing trade -2.89%, average trade 2.58%

These number are crunched without adding the IFT limitations or TSP's End of Day criteria.

 

[JTH]

lol I forgot to answer your question.

Some crossovers can last for as little as 20 days.

For the 20/50 SMA the average crossover was 80 days, for the 20/50 EMA it was 103 days.

 

[CrabClaw]

Thanks! definitely looks like another spoke in an increasingly bearish wheel. I'm really thinking quick in and out trades for me until further notice. try not to get greedy just grab a little on the good setups. Might be missing one right now actually.

 

[Birchtree]

I would call it a slight breach rather than a full death cross yet. The slow stochastics under 20 are signaling a buy. As long as the slope of the 200 day MA is trending up we should be safe from any bears. I prefer following the 24 month EMA which currently is holding 1082.90 and the month is not over yet. If the SPX pushes back through the 50 day MA at 1111, look for the market to ignite a further rally. Too soon to get bearish yet with these panic bumps in the road.

 

[JTH]

1097 is the key level I'll be watching, and we need to close above it. It's also a 50% retracement from 1150 to the 1044 low we put in on Friday.

But most eveything needs a pullback in the dollar...

 

[CrabClaw]

Any thoughts on the dollar going forward Jason?

 

[JTH]

Any thoughts on the dollar going forward Jason?

Yea I think I'm wrong 9 times out of 10 :cheesy:

Maybe a short-term bounce