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July 17, 2012 at 08:17 AM
It’s a scary name for a scary situation. The S&P 500 index is on the verge of hitting an “ultimate” death cross, according to a research note by Societe Generale published Monday.
Albert Edwards, a strategist at the bank, noted that the term “death cross” derives from the shape on a chart “when a 50-month moving average (currently at 1152) falls below the 200-month average (currently 1145). It is seen as a sign of a looming bear market.”
Edwards added that he believes the recession is now here (hence his “ultimate” adjective), “just as it was in the fall of 2011 until global coordinated easing injected trillions and masked its impact, and will manifest itself unless the global central banks step up far more aggressively and tune out reality once again.”
The last time this “extremely rare event” almost happened was in 1978 toward the end of the 1965-82 secular bear market, but the curve was able to hold.
