On August 12th, 2011 we saw the S&P 500 Index complete the “death cross” for the second time in a little over a year. The financial media has had a field day with this ever-dreaded "death cross" over the past couple of days, so we thought we shed some light on matter based on historical results.  First and foremost, the a “death cross” is when the 50-Day Moving Average (MA) crosses below the longer term 200-Day MA.  There have been 43 completed “death crosses” since 1928, but more often then not, they turn out to be “much ado about nothing”.  For example, of the 43 total crosses, only 13 of them have produced negative returns.  So, 70% of the crosses have actually shown a positive return in the market, which is certainly to the contrary of what one would assume from something named the "death cross".  Much of the recent significance placed upon the cross is due to the recent crosses that took place, like 2007 to 2009 or 2000 to 2003 when the S&P 500 fell -39.70% and -32.84% respectively.  However, the most recent “death cross”, which took place last summer between July 2nd and October 22nd 2010, produced positive returns for the S&P 500 as it rose 15.70%.  If you were to average all of the “death cross” trades, they have essentially been flat, down -0.02%.  Below are some key facts about the "death cross."

• The average number of days the "death cross" has lasted in the past is 242 days
• The average performance of the S&P 500 during a "death cross" is -0.02%
• The most recent cross (7/2/10-10/22/10), lasted 122 days and the S&P 500 ended in positive territory, up 15.70%.
• The worst "death cross" occurred between 11/22/1929 to 9/19/1932 when the S&P 500 would have fallen -65.91%.
• The shortest "death cross" lasted only 7 days in November 1999 (11/4-11/11). The S&P 500 ended up rising 1.38%.

How will the recent "death cross" unfold? Only time will tell, but based off previous crosses, there is higher probability of seeing the market higher than seeing the market lower once the 50 day moving average is able to cross back above the 200 day moving average.  However, we can see from the "successful" crosses below, the risk in being wrong is extremely high should we see another 2000 - 2003 time period or another 2007 - 2009 market.  This is when we remind ourselves that what is, is.