As the dangerous situation in Ukraine and Russia heats up, investors also weigh the Fed-related news. The Nasdaq Composite Index fell into a “Death Cross” on Friday (18th), and the 50-day moving average of the index crossed the 200-day moving average. , for the first time since April 2020.
The Nasdaq shed 1.23 percent to 13,548.07 on Friday, having fallen 16 percent from its Nov. 19 closing high, as the index’s 50-day moving average crossed below its 200-day moving average and fell into a death cross, underscoring the extent of the stock market meltdown over the past few weeks.
This pattern is used by some investors to assess long-term stock market moves, and it sometimes signals further weakness, as it did before the dot-com bust in June 2000 and the global financial crisis in January 2008.
At present, many analysts are bearish on stocks, and the reason has nothing to do with death. Analysts of many investment banks, including Bank of America, have judged that the impact of the Fed’s interest rate hike in the next six months will evolve into a recession. The dangerous situation in Ukraine and Russia Warming will also affect the market.
“A death cross doesn’t always mean doom is on the horizon, it just means the stock market might be in a longer-term downtrend,” said Jay Woods, strategist at DriveWealth Institutional.
For long-term investors, a death cross might represent a buying opportunity.
The Nasdaq Composite has seen 31 death crosses since 1971, with the index rising six months later in 77% of cases, according to data compiled by Potomac Fund Management.
“Death crosses might actually signal a buying opportunity for long-term investors as stocks get cheaper,” Woods said.
