The “dark cross,” also known as the “death cross,” is a popular technical indicator. It occurs when a stock, ETF or index’s 50-day moving average falls through the 200-day moving average.
With monikers like “dark” and “death,” you know it can’t be any good. And this bearish indicator certainly looks bad on a chart.
But does the dark cross hold up as a way to determine the market flow? And is it really as bad as its name would have you believe?
Well, it’s right about 40% of the time and tends to be late in its signal. We’ve been using our own indicator for many years, and we have a better track record than that.
Ron Griess of The Chart Store produced the two tables below. Table 1 shows the performance of the S&P Composite for the time periods listed when the 50-day moving average was falling and crossed the 200-day moving average while the 200-day moving average was still rising.
Table 2 shows the performance of the S&P Composite for the time periods listed when the 50-day moving average was falling and crossed the 200-day moving average while the 200-day moving average also was falling.
What the charts say is that, more than half the time, the market was up a month or two later. So perhaps the dark cross isn’t really so dark after all.
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