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Anthony Mirhaydari: 'Death Cross' Spells Doom for Stocks

Anthony Mirhaydari: 'Death Cross' Spells Doom for Stocks
(Dollar Photo Club)

By    |   Thursday, 03 September 2015 08:00 AM

The dreaded "Death Cross" has emerged for the first time in four years.

That's when the S&P 500 index' 50-day moving average falls below its 200-day average. And that's a bad omen for stocks, says Anthony Mirhaydari, founder of the Edge and Edge Pro investment advisory newsletters.

"The long-term trend is at risk, as the index closed Monday’s session below its 12-month moving average, a strong predictor of bear markets," he writes in The Fiscal Times.

The S&P 500 had tripled from its March 2009 low before the market swoon began last month.

The S&P 500 closed at 1,972.18 Monday, and then dropped another 3 percent Tuesday. It has rebounded 1.1 percent Wednesday to 1,935.

"Unless stocks mount a historic charge higher here, ending September 6 percent higher, it could be game over for the bull market," Mirhaydari says. "History isn't on their side."

The S&P 500 dropped 6.3 percent in August. Since 1928, the S&P 500 has slid more than 5 percent in August 13 times, and in nine of those instances, stocks declined in September too.

Bob Janjuah, senior independent client adviser at Nomura Securities, is bearish on stocks as well.

"When we were up at [2,100 for the S&P 500 index], I thought we would see 1,700 at some point late in the third quarter, or early in the fourth quarter," he told CNBC.

The index hit a record of 2,134.72 May 20. The 1,700 level represents a drop of 12 percent from here.

"We made some progress toward that target, I think there's a bit more to go," Janjuah said. The index hit a low of 1,867.01 Aug. 24.

Sluggish growth in China and much of the rest of the world will weigh on stocks, he said.

"What I think the investor needs to understand is that globally there's not enough growth, there's way too much capacity. And we've hidden that gap with this thing called liquidity. Actually liquidity is debt."

In China, the government reports GDP growth of 7 percent, but private economists say its closer to 3-5 percent.

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The dreaded "Death Cross" has emerged for the first time in four years.
Death, Cross, doom, stocks
367
2015-00-03
Thursday, 03 September 2015 08:00 AM
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