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Trading and Investment Terms

Dead Cross

Negative convergence may lead to severe selling pressure and the price may stay weak for a month to a year.

 

The death cross is a chart pattern that indicates the transition from a bull market to a bear market. 

This technical indicator occurs when a security’s short-term moving average (e.g., 50-day) crosses from above to below a long-term moving average

 

The Dow’s last death cross appeared on Dec. 19, 2018, after the Dow had dropped 13.1% from its then-record close on Oct. 3, 2018. The Dow bottomed just three days later on Dec. 24 at 21,792.20, or 6.6% below the Dec. 19 close.

 

The death cross indicator has proven to be a reliable predictor of some of the most severe bear markets of the past century: 1929, 1938, 1974, and 2008. 

Investors who got out of the stock market at the start of these bear markets avoided large losses that were as high as 90% in the 1930s

 

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