Did Buying the “Death Cross” Make You Money? VIEW IN BROWSER By Michael Salvatore, Editor, TradeSmith Daily In This Digest: - Did you buy the bullish “death cross” and make 11%?
- The most extreme swing from fear to greed since March 2020…
- Why Jeff Clark is betting on a rollover…
- A brand-new convergence setup to test ahead of today’s big event…
A couple months back, I shared the good news about death crosses… Death crosses sound like the last thing anyone wants to hear about. Especially in mid-April of 2025, when the S&P 500 was about 12% off its highs and everyone was scrambling to understand the new world order of tariffs. But I hope you didn’t skip that email… Because it would’ve made you money. Back then we took a look at what has actually happened to the S&P 500 when it made one of these death crosses, which is when the 50-day moving average crosses below the 200-day moving average. It supposedly shows us a shift in long-term momentum that foretells bear markets. Only, that doesn’t hold up to the data… like at all. As we wrote: Since 1990, we’ve seen 16 death crosses on the S&P 500. Here’s what happened after, on various hold times: 
The “death cross” doesn’t seem so scary now, does it? In fact, it seems almost like the kind of thing you see closer to the end of bear markets than the beginning… Now, to be clear, there are two key examples of times when death crosses led to further painful losses. That’s what the longer timeframes on that last column are all about. Those are the truly devastating bear markets – the 2000 and 2008 drawdowns that seemed to never end. And there’s no reason that can’t still happen this time. But the majority of the time, the reality is that “death crosses” are buy signals on both short- and long-term timeframes. That’s worth thinking about. Yes – someone came up with the term “death cross” and evidently didn’t think to check their work. It’s been about two months since the last death cross, and the S&P 500 is not lower. In fact, it’s up by about 11.64%. That’s so good, it’s an anomaly – the average return (counting wins and losses) of a death cross at three months is historically just above 10%. We’ve seen a strong positive reaction since the mid-April lows, brought on in part by a huge pullback in the tariff narrative by the White House. | Recommended Link | | | | Starting as soon as 7 days from now, you could go for 10X gains from potentially historic AI announcements. How? By following a market signal discovered by master trader Jonathan Rose. He calls it the “Big-Money Tell.” And it gives him a way to invest just before potential major AI-related announcements send stocks flying. He even used the signal to recommend GameStop to his followers before it soared up to 10,633%! Jonathan believes the next big AI-related announcement is coming soon. It’s virtually inevitable. And you can use his “tell” to potentially invest BEFORE it happens… starting as soon as 7 days from now. How? Click here for the full details from Jonathan. |  | | But will the recovery hold? We can’t deny there’s some funky stuff about this rally. One thing is the extreme swing in sentiment. TradeSmith’s proprietary Fear & Greed indicator shows us just how extreme it was. On March 31 of this year, the Fear & Greed gauge hit 10. Just a month and change later on May 12, the gauge was all the way back up to 81: 
That chart starts just before January 2020. Back then, we had a massive collapse in the Fear & Greed gauge, with an Extreme Greed reading of 90 on Jan. 13 falling all the way to 0 – as fearful as markets could possibly get – on March 2 during peak pandemic panic. Just three months later, though, sentiment completely reversed. On June 1, 2020, we were back to an Extreme Greed reading of 86. That was one of the fastest reversals in sentiment of all time. But this past couple months was even faster. It took half the time in 2025 for investors to swing from Extreme Fear to Extreme Greed as it took in 2020. There’s two ways to look at this… - The tariffs reaction was overdone and the recovery is justified…
- The rally is overdone and we’re set for another drop.
Our volatility and options expert, Jeff Clark, is taking the path less traveled and betting on a drop. Here’s Jeff speaking to his Delta Report readers yesterday morning: Complacent investors are about to get smoked. That’s what happens following a bear market rally. Investors let down their guards. They get comfortable with the stock market moving higher. They don’t worry about valuations, earnings, or the potential for negative headlines. They figure everything is going to be just fine. Then they get smoked as the bear takes another swipe. The Volatility Index (VIX) – commonly referred to as the “Fear Index” because it’s a gauge of fear in the market – traded above 50 two months ago as the S&P 500 dipped below 5,000, and the bear took his first swipe. Since then, the market has rallied back, nearly recovering all the losses from March and April. The VIX has dipped down to 17-ish – where it was trading in early February before all the tariff-related chaos. In other words, the recent bear market rally has done its job. It has punished the short sellers who held onto short positions for too long. It has coaxed the reluctant bulls back into the market. And it has lulled just about everyone into a sense of complacency. This is what often leads to a sudden spike in volatility. Jeff’s been vocally bearish lately… We covered many of the zoomed-out reasons to be bearish on Monday. In short, the bond market is in uncharted territory with both a yield curve disinversion and an accelerating bear market at hand. Neither factor is a strong boon for stocks. But zooming in, one big reason stocks could plunge is – and this might sound ironic – just how calm markets are right now. Here’s Jeff with more on that: Take a look at this chart of the Volatility Index (VIX) along with its Bollinger Bands… 
Bollinger Bands indicate the most probable trading range for a stock or an index. Whenever the VIX gets near its lower Bollinger Band, it’s a sign of investor complacency. The red arrows on the chart point to the last few times the VIX was in this condition. Each time, volatility spiked shortly afterward. And, of course, that coincided with a broad stock market decline. The VIX closed yesterday just above its lower Bollinger Band. That’s a reason to be cautious on the stock market for the next several weeks. It’s also a reason to bet on a spike higher in volatility. The VIX is at its lowest point since the end of March, and is at around the same distance from its lower Bollinger Band now as it was then. Technical analysis has a funny habit of coinciding with headline risk. Just as it starts to seem nothing could go wrong in markets, some new development kicks over the apple cart. That’s what Jeff sees happening now. But, importantly, he’s not betting it all on red. Jeff understands that downturns are no time to go all-in. They’re powerful, but brief and tricky to pin down with absolute precision. That’s why the answer is not to run for the hills and stuff cash under your mattress. It’s to use this volatility as a tool to fuel huge short-term options trade returns. When you shift your mode of thinking this way, you no longer fear market downturns. In fact, you might even start to look forward to them – as they provide ample opportunity to make cash that you can use to buy your favorite stocks on sale. Here at TradeSmith, we just took one of Jeff’s favorite approaches for trading volatility and systematized it. Now his readers get a daily report of all the individual stocks showing strongly bullish or bearish patterns to trade. During today’s Countdown to Chaos event at 10 a.m. Eastern, Jeff will lay out 10 such opportunities for free. But I’d like to share one setup to keep on your radar. Take a look at this chart of eBay (EBAY)… EBAY here is quite extended to the upside, with the price well above the shortest-term moving average and leagues ahead of the longer average: 
Those three colored lines are three specific time-weighted moving averages. When these lines are far apart, it can show a stock is overextended to the upside or downside. If EBAY shows some weakness in the coming days, it could take a quick trip down below the shortest-term average. Think of it this way: Every price swing creates divergences. And every divergence creates opportunity. It even gives you a game plan to follow, like here with $70 as a downside target for EBAY. To get all 10 of the latest and greatest setups – bullish and bearish – be sure to join Jeff for his presentation at 10 a.m. Eastern. To your health and wealth, 
Michael Salvatore
Editor, TradeSmith Daily | 
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