Don’t Hold Your Breath

On March 11 we questioned whether the Death Cross was a valid signal of more downside to come [see: Is the Death Cross Really Deadly?]

…it’s possible that it will add to the bearish pressures on stocks. It’s also possible that it will mark a bottom.

Since then, the war in Ukraine has intensified, the Fed has raised interest rates, and inflation has worsened.  Why then, did the market bottom on that day, rallying 7.3% since then? As we pointed out then…

It would be easier to be afraid of a death cross if the Fed and other central banks weren’t so involved in propping up markets – something they’ve greatly perfected since 2008.

The fact is that, despite the recent fed decision to raise rates a “whopping” 0.25%, central banks still largely control markets. They still suppress interest rates and volatility and still send wildly bullish signals to the algorithms responsible for 90% of the trading activity in equities.

The most recent campaign not only discredited the death cross signal, but has put ES/SPX within pennies of their 200-day moving averages and a bullish 10/20 moving average cross. The market will regain its integrity only when central banks walk away and leave it up to investors. Don’t hold your breath.

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