Death Cross October Trading Plan October 2015. What is the death cross in Technical Trading?

The death cross is used in technical trading and occurs when the 50 moving average crosses the 200 moving average on a daily chart.  This can some times show a reversal of the general trend. The implication of the Death Cross is that we are switching from a long term bull market to the beginning of the bear market  Sometimes it can also show a correction for a further continuation of the major trend as we saw in 2011. Presently we are in the middle of this pattern and haven’t seen the break in either direction.  In this chart it could mean that we are in a start of a Bear Market.

We’re focusing on a daily chart for the S&P 500.  Price action on the S&P 500 is in a consolidating range from 2020 to 1830. There is an 80 point range which buyers and Sellers have been pulling price around.   Price under the 50 MA has been very volatile.

In early September we experienced  the “Death  Cross” Where the 50 moving average has crossed the 200 moving average.

The Death Cross as a continuation pattern.

This happened four years ago, August 2011, where we had a similar pattern of a selloff with a consolidated  range where buyers and Sellers were fighting for direction and then after 4 tests down on the daily charts we passed through the 200 Moving average and then continued in The bullish direction of the market.  Once price broke through the 50 moving average and the buyers were in control price tested back to the point of control where support was found and then we continued back through the 200 moving average and on to new highs.

The Death Cross can be a reversal pattern or a continuation pattern.  Joel Wissing

The Death Cross typically means the 50MA has crossed below the 200MA signifying the emergence of the bear market.  This is where we will see a dominant selling of rallies until Market makers have flushed out the investors.  This will give Market Makers a new base to trade from as they start to accumulate at the lower price levels.

Watch for support and volume at the approach of the support and resistance levels.