In that past I’ve discussed using the 20/50 ema pair as a tool for helping to define intermediate-term trends in the stock market. On Tuesday of this week, that moving average pair triggered a death-cross (20-day ema crossing below the 50-day ema) on the S&P 500 Index, providing a relatively infrequent sell signal. As with any indicator, this moving average pair is not perfect but as this 7+ year chart of the $SPX illustrates, you’d be hard pressed to find a more simple, yet effective way of defining intermediate-term trends (i.e- trends typically lasting weeks or months).

Once again, this indicator, like all, is subject to occasional whipsaws (brief false buy & sell signals). In fact, the last time I pointed out a death-cross on the 20/50 ema pair was back in early February. That signal proved to be a false signal as it came just on the heels of the January correction with the 20-day ema only trading below the 50-day ema for 5 days before crossing back above. The only other whipsaw signal in the pair over the last several years occurred back in early Sept 2013 with the 20-day trading below the 50-day for just 4 days. Neither of those two previous whipsaw signal would have inflicted much damage to those who positioned short on the bearish cross, had they covered that short position on the bullish cross just a few days later. The 20/50 ema pair also works very well on other US stock indices such as the Nasdaq Composite & Nasdaq 100, both of which have yet to signal a bearish crossover but are poised to do so such the markets move much lower, as expected.

$SPX 50-20 ema trend Oct 9th

$SPX 50-20 ema trend Oct 9th