But given that the technical moving average crossover strategy is a lagging indicator, it does not always prove to be fruitful for the traders who follow it.
The same scenario occurred in December 2018, as a death cross in the S&P 500 materialized amid a growth scare and an interest rate hike from the Federal Reserve. That, once again, occurred near the bottom for the stock market, which ultimately went on to rally and subsequently flash a golden cross buy signal.
The lagging nature of the moving average crossover strategy highlights the fact that these buy and sell signals often throw off false positives, leaving traders who follow them prone to whiplash. And again during the dot-com bubble, traders that followed the September 2000 death cross in the Nasdaq 100 would have avoided a more than 70% decline over the next two years.
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