S&P Ultimate Death Cross Watch (50 Month Moving Average/200 Month Moving Average)

S&P 500 - Source: FreeStockCharts.com
Since Societe Generale strategist Albert Edwards brought up the ultimate death cross in his recent research report, I'm going to check it out again. After the S&P crashed last year and was saved by the 200 month moving average, I saw that the 50 and 200 month moving averages were converging with each other, which was worrisome. Now it looks like they finally met up, so the S&P is at an important inflection point. Check out charts of the S&P 500 going back to 1971 and 1997 with the 50 and 200 month moving averages.

In my opinion, if the 50 month moving average crosses below the 200 month moving average, it would show that the secular bear market is getting old, and that a final battle (or battles) could soon decide its fate (like a 2008 event). But, it would also show that the secular bear market's force is still strong and intact, which could mean there is another lost decade ahead. But, if the S&P can confirm a break (with retests) above the 2007 high (1,576), that would be the ultimate catalyst for a new secular bull market, in my opinion. At this point, the Fed's quantitative easing program would have to backstop a new recession and falling EPS. Any thoughts? Albert Edwards found interesting historical data on the monthly moving averages. Here are a few quotes from his report via Zero Hedge and Investment Week:

"Finally I want to share with you news that the S&P is on the verge of an “ultimate” death cross (see chart below). This is where a 50-month moving average (currently at 1152) falls below the 200-month average (currently 1145). The Trend blogspot (link) tries to make some sense of this very rare event. They note that the averages came close to crossing in 1978 towards the end of the 1965-82 secular bear market, but just held. By contrast Japan suffered a monthly death cross in 1998 and 14 years later we are still in the firm embrace of the bear. Watch this space." (at Zero Hedge with charts)

And here is Albert Edwards' thoughts on Treasury yields.

“As the US hard landing is acknowledged, another decisive move down in US yields is imminent, mirroring the move in Korea. Add to that the likelihood of a China hard landing and it not hard to see US yields declining below Japanese levels in the next 12 months.” (at Investment Week)

Here is a closer look at the ultimate death cross.

source: FreeStockCharts.com

And here are reactions to Albert Edwards' call on CNBC:

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