Will the death cross of the S&P 500 become a horror for investors?

Will the death cross of the S&P 500 become a horror for investors?

The S&P 500 has generated a worrying technical signal known as the "Cross of Cross". According to the stock exchange expert Jürgen Schmitt, the 50-day average of the index thwarted the 200-day line from top to bottom. This signal is often considered a harbinger of a possible market crash, which leads to nervousness among investors. However, Schmitt warns of exaggerated panic and emphasizes that the death cross is only one of many indicators that can influence market development. As reports [oe24] (https://www.oe24.at/digital/angst-vor-to-treuz-an-boersen-klaert-klaert-klaert-klaert-klaert-klaert-klaert-klaert-klaert-klaert-klaert, no clear prediction can be made on the stock exchange at any time.

Despite the current uncertainty, statistics show that the S&P 500 usually ends up in the profit zone after a decline of more than 10% within one year. The annual price gains after such declines vary greatly and range from 9% in 2008 to 69% in 2020. Currently the S&P 500 has also fallen on its 200-week average, which many investors interpret as an interesting opportunity for entry opportunities.

the death cross in detail

The current Cross of death has been the first since March 2022. According to Vermögenszentrum, it is important to note that the S&P 500 in about two thirds of the cases one year after a death cross Stand, on average 6.3%. In more than half of the last 24 death crosses, the largest drop in the price was already completed before the signal occurred. These signals can have two main causes: structural bear markets or short -term event -related corrections. The current death cross could fall into the second category and may have been influenced by geopolitical factors, such as Donald Trump's customs policy. In addition, fears strain the markets of a possible recession and monetary policy uncertainties.

Current indicators such as the Fear and Greed Index are the lowest level since the Covid 19-Crash, and the CBOE Volatility Index (VIX) has similar values ​​as during the crisis. Historically, such mood lows are often considered a contraindicator, which means that they could indicate an upcoming recovery. After the last cross, three scenarios are conceivable: a quick recovery like after the Corona Crash 2020, a longer downward movement similar to the movement with increased volatility.

stock exchange psychology and investor behavior

In order to understand the current market situation, it is helpful to look at the principles of stock exchange psychology. This examines how psychological factors influence the behavior of market participants, including emotions such as greed and fear. Such emotions shape the purchase and sales decisions and can lead to irrational behavior patterns. Delta value emphasizes that cognitive distortions and emotional factors are crucial for the market movements and the development of trends and courses.

A deeper understanding of one's own emotional reactions can help investors make more rational decisions. It is important to be aware of your own cognitive distortions in order to minimize the influence of fear and greed on investment decisions. If it is possible to control these psychological factors, this can lead to improved investment performance and lower stress levels.