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Bear Market Indicator ‘Death Cross’ Makes Ominous Appearances

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Black Swans, Hindenburg Omens—can’t at least one market indicator be called Candy and Unicorns?

MarketWatch columnist John Nyaradi warns of the recent appearance of “death crosses” in major indexes and sector funds.

“The death cross forms when the 50 Day Moving Average crosses the 200 Day Moving Average in a downward trajectory,” Nyaradi explains. “Particularly troubling is the fact that several underlying sectors are staring the death cross in the face, including technology, financials, industrials and materials. Some of the more defensive sectors, such as utilities and consumer staples are still in bullish modes. That’s something.”

So what’s to be done?

Nyardi says that for “ETF investors, there are possibilities for profit, as always, as one can look at each of these sectors and still find opportunity.”

“For the most sophisticated investors and traders, inverse ETFs, put options or shorting individual stocks could be an appropriate strategy, while for the more conservative investor, positions in the defensive sectors could be a good choice, allowing overall exposure to equities while striving to limit potential downside risk,” he says. “Another option would be to buy put options on current positions as insurance against further downside moves. Many investors have also chosen to move assets to cash, because in bear markets, cash is king.”


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