Chris: On March 14th S&P 500 triggered what technicians refer to as the death
cross pattern. This pattern has historically been viewed as a bearish technical signal with such an
ominous-sounding name. What is the death cross? It's a signal generated by the crossing of the S&P
500 price of its 50-day moving average below its 200-day moving average. On March 14th, 2022, the
S&P 500 generated its 49th death cross since 1928. According to Merrill Lynch research, the prior
Friday on March 11th, with the S&P 500 trading around 41.85 intraday, the Oak Harvest investment
team released our weekly podcast titled Early Optimism: Things That Lead. Three indicators
are starting to lean positive for equities for the upcoming months. Viewers might be asking: what in
the world is going on? Whom and what data should I believe? I'm Chris Perras, Chief Investment
Officer at Oak Harvest Financial Group. We'll cover the topic of the death cross today, what
they are? how frequent they happen, and if they've been historically relevant and good predictors
of the future to your portfolio over time? If you count late November as the top, given when
divergence has started beginning in the market, we're in our third or possible fourth month of
the downturn. Viewers, this is a correction in both price and time. Listen to me, it is not
a dip. With this correction continuing to play out over the coming months and likely quarters,
many long-time bears have come out of their caves with negative ammunition. They've gotten large
and loud in their pronouncements on TV, much as they've done for the last 10 to 12 years.
The question to investors is: should their concerns over the death cross technical pattern
worry investors? Is the death cross historically the death nil for the markets? Recall our viewers:
no data series is perfect, no batter or investor bats 1,000. However, according to
data from Merrill Lynch and many others, returns after a death cross have been while lackluster,
not as bad as the name of this signal would imply. In fact, for the 49 instances since 1929,
the S&P 500 was up more than 50% of the time, 1, 3, 6, and 12 months after the death cross signal.
Only the 20 day holding period shows the S&P 500 less than 50% of the time after the death cross.
We've included the summary Merrill Lynch data for your own analysis.
However, I want to bring viewers' attention to an even narrower timeframe than the last 80 years.
I ask: what are the results of the death crosses this cycle? By this cycle, I mean, since the end
of the great financial crisis in early 2009. Prior to March 14th, there have already been
6 death crosses in the last 12 years. During this 12-year ongoing bull market, interrupted
by the COVID pandemic flash recession, bears have been able to pronounce the end or near end
based on this indicator six times already. How'd they do? Well, we've highlighted these in the
table behind me. The forward return results from these six death crosses, anything but bearish.
3 months returns have been almost 10%. 6 months returns, 15%. Returns, 1 year later, have averaged
25%. Remember, viewers, no indicator is perfect, and past performance is no guarantee of the
future, but the death cross, this cycle, well, let's just say, it's been 100% wrong so far.
Will this time be different? Will this indicator break it's losing streak? Time will tell,
but so far, it's not looking very good. Since the S&P 500 closed on March 14th at 41.73,
the index is already up over 5% as of March 18th. Chris: At Oak Harvest, we think our clients are
best served by us helping them with their future needs and risks, instead of focusing on the past
and another overhyped, often wrong, technical timing tool. Our crystal ball is far from perfect.
However, we like to keep you up on what it says about the uncertain future, not about what we
already know about a certain past, which is what a technical pattern such as the death cross does.
We are a comprehensive financial advisor located in Houston, Texas. Give us a call here to talk
to an advisor. Let us help you craft a financial plan to meet your retirement goals. Call us here
at (877) 896-0040. We're here to help you on your journey into and through your retirement years.
I'm Chris Perras, and from everyone here at Oak Harvest, have a great weekend.