Dow Jones Shows First "Death Cross" Since March 2022

The Dow Jones Industrial Average experienced a significant milestone on Monday, marking its first "death cross" since March 2022. This development has raised concerns among market participants as stocks seek to continue their rebound rally from November.

Despite two consecutive green sessions, the Dow was unable to avoid entering death-cross territory due to the weight of its recent three-month losing streak on the 50-day moving average. However, gains from earlier this year provided a boost to the 200-day moving average.

The Dow DJIA A closed at 34,337.87 on Monday, according to FactSet data, representing an increase of 54.77 points or 0.2%.

A death cross occurs when an asset's short-term trend, represented by the 50-day moving average, falls below the longer-term trend, indicated by the 200-day moving average. Market technicians consider this to be a crucial signal.

As speculation about a potential death cross grew in recent weeks, David Rosenberg, the president of Rosenberg Research, expressed his view that it would be "uber bearish" for stocks.

See: Dow edging closer to bearish 'death cross' signal: What it would mean for stocks

Buying Opportunities During Bull Markets

Some technicians argue that death crosses, typically interpreted as a bearish signal, can actually present buying opportunities during bull markets. It has been observed that these crosses have appeared around market bottoms in certain cases. However, others argue that a true death cross occurs only when the 50-day moving average crosses below the declining 200-day moving average, which is not the situation in this instance.

Historical Performance

According to Dow Jones Market Data, looking back to 2000, the Dow has shown positive performance following a death cross. On average, one year after the occurrence, the Dow was up 8.1%. Three months afterward, it registered an increase of 4.6%. Notably, over the past 10 instances between March 2022 and the second half of 2005, the Dow experienced a rise in three-months' time in eight instances.

Market Developments

While the Dow closed higher, both the S&P 500 (SPX) and Nasdaq Composite (COMP) ended lower on Monday. Investors were eagerly waiting for the release of the latest batch of U.S. inflation data scheduled for Tuesday at 8:30 a.m. Eastern.

Year-to-Date Performance

The Dow has seen a year-to-date gain of 3.6%. It has surged by almost 20% since its closing low in September 2022, which marked the lowest level during last year's selloff. Furthermore, this closing level was the lowest overall since November 2020.