The S&P 500 recently flashed what traders ominously call a “death cross”, a technical signal that usually gets market watchers whispering about doom, gloom, and more losses to come. The trigger? Donald Trump’s new wave of tariffs, which sent stocks sliding and investors scrambling.
But according to Adam Turnquist, chief technical strategist at LPL Financial, it’s not time to hit the panic button just yet.
What Is a Death Cross?
In case you haven’t brushed up on your market lingo lately, a death cross happens when a stock index’s 50-day moving average dips below its 200-day moving average. It’s typically seen as a bearish signal, indicating momentum is turning downward.
This past week, both the S&P 500 and Nasdaq 100 triggered this signal.
But history tells a more complicated—and more optimistic—story.
The Surprising History of Death Crosses
Turnquist dug into the numbers and found that death crosses, despite their name, don’t always signal catastrophe. In fact, they’re often followed by positive stock returns:
- 3-month average gain after a death cross: Positive
- 6-month average gain: Also positive
- 12-month average gain: Yep—positive again, with a 72% win rate
So, while the formation does reflect lost momentum, it’s often just that—a reflection of past damage, not necessarily a harbinger of more to come.
Death Crosses After Waterfall Declines? Even Better News
Here’s where things get interesting: when a death cross happens after a sharp decline (like this year’s Trump-tariff-driven selloff), the odds for a rebound go way up.
Turnquist’s data shows that when a death cross occurs within one month of a 15% market drop, the average 12-month return jumps to 16%. The win rate? A whopping 83%.
And remember, the S&P 500 dropped as much as 21% during the recent correction. So technically, this death cross could be more of a turning point than a warning sign.
So… Is the Bottom In?
According to Turnquist, it might be.
He cites signs of investor capitulation, oversold conditions, and a cooling off in selling pressure as indicators that a market bottom may have formed. But don’t expect a dramatic, V-shaped recovery like we saw after the 2020 pandemic plunge.
“I think this is gonna be more of a process,” Turnquist said.
What he wants to see next is market leadership and breadth—that is, a rally where 90% or more of stocks rise together. That would signal a real, sustainable rally.
Right now, that breadth isn’t there. But if it appears, Turnquist would be far more confident in the market’s ability to climb back.
What Should Investors Do?
- Don’t let the headlines shake you: Death crosses are more about what already happened, not always what’s next.
- Look for confirmation signals: Broad market rallies and improving sentiment can confirm a bottom.
- Stay diversified and avoid impulsive reactions—especially when market moves are driven by fast-changing policy news, like tariffs.
As Turnquist summed it up: “The name is not as ominous as it may sound.”
