Business Insider is out with a piece on the ‘Ultimate’ Death Cross’, the 50 period moving average crossing below the 200 period moving average for S&P 500. Many experts and talking-heads are mentioning it. However, this ultimate crossover is not about daily moving averages rather it is about longer term i.e monthly moving averages. Now one would think that a longer term trend should be more reliable than a shorter term trend. But that would not be very accurate.

The actual history of S&P 500 is short – 55 years – only, and during this time this death cross has never occurred.

So let’s check this out. The S&P 500 only dates back to March 1957. Since that time the 50-month MA has never crossed below the 200 month MA. The closest it came was the June 1978 monthly close, which gave us a 2.09 point spread between the 50-month (92.09) and the 200-month (90.00). During the 55-plus years that the S&P 500 has existed, there has never been an “Ultimate” Death Cross.

Even using synthetic S&P 500 data –since 1871 – created by Yale professor Robert Shiller, this cross does not do justice to its name. Here is what S&P 500 did within this “Death Zone”:

June 1894 to February 1900: +43.5%
November 1917 to July 1919: +35.1%
February 1920 to August 1925: +38.9%
May 1934 to June 1939: +16.5%
March 1940 to April 1946: +53.6%

Based upon this performance, seems like we should all be praying for a “Ultimate Death Cross” every decade. Perhaps, we should rename this phenomenon to “Boom Cross”.

Kidding aside, this pattern does show up few years after a prolonged market decline or recession. Since 1930’s we have not had such a severe decline. The last time time it came close was in 1978, which followed the market decline of 1973-1975. The current imminent cross-over is set to occur 3-4 years after the 2007-2009 decline. If the cross over does happen then, based upon the past performance, it may be good time to get bullish.