Home > equities, market analysis, quantitative analysis, technical analysis > Death Cross on the S&P TSX Composite?

Death Cross on the S&P TSX Composite?

The TSX is awefully close to a Death cross signal (50 day simple moving average crossing the 200 day moving average from above i.e. 50 day average is less than 200 day average)…

I think we are bound to get a death cross within the next week… the TSX is about 300 points away to signal the death cross as of yesterday’s close.

Technical Analysis of S&P TSX Composite Index with Death Cross

Source: stockcharts.com

How good is the Death Cross signal? To answer this I looked at all the historical data I could get and analyzed the returns based on Short Selling at close on the day of Death Cross and covering and going Long at the next Golden cross (50 day SMA crosses 200 day SMA from below)

I understand 10 years is a small sample but it is better than nothing :)

If you only traded on the Death Cross & Golden Cross from the first signal in Nov 2000 you would be way ahead of the market for the analyzed period analyzed… hell, you would be better off just going long and sitting out until a Golden cross is recognized!

On the other hand, the Death Cross is only good half the time where as the golden cross is only good 4 out of 10 times BUT provides a better return than the death cross…

24-Nov-2000 15-Jul-2010
Total Death Cross Golden Cross
Short Trade Long Trade
Total Trades 11 6 5
Winning Trades 5 3 2
% Winning Trades 45% 50% 40%
Largest Winning Trade 56.8% 20.5% 56.8%
Largest Losing Trade -7.7% -7.1% -7.7%
Cumulative Compounded Return 125.0% 25.8% 78.9%
$1000 = 2,249.82 1,257.75 1,788.77
Buy & Hold Return 30%
$1000 = 1,301.11

(If you know where I can get historical data beyond 2000, please let me know)

For more information on Death Cross & Golden cross check out:

http://cssanalytics.wordpress.com/2010/07/08/death-cross-short-strategy-on-sp500-its-best-to-exit-early-versus-waiting-for-a-golden-cross/#comments

http://ibankcoin.com/woodshedderblog/2010/07/01/what-you-need-to-know-about-the-death-cross/

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  1. July 27, 2010 at 7:20 PM

    Interesting analysis. The death cross is a fairly good signal even if it doesn’t indicate anything earth shattering as it only requires enough investors to believe in it for it to be a self fulfilling prophecy of a fall in confidence. The amount of publicity its had recently might indicate a new false idol in creation and thus some miraculous prophecies may be about to be fulfilled.

    I’ve just blogged a little majorly amateur analysis here: http://youreconomist.wordpress.com/2010/07/27/double-dips-and-the-death-cross-an-impending-meltdown-or-financial-fantasies/
    perhaps a little melodramatic…

    • July 28, 2010 at 8:13 AM

      thanks Brooke…

      i find your analysis interesting too… well simplified for the novice investors

  1. August 11, 2010 at 5:56 PM

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