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On The Verge Of The "Ultimate Death Cross"

Tyler Durden's picture


We will get into the punchline from Albert Edwards' latest missive shortly, but first we wanted to share his view on analyst sentiment, and how it relates to the US economy:

Regular readers will know that we have always followed analyst optimism closely (optimism here defined as the percentage of analysts EPS forecast changes that are upgrades). We have shown previously that it is not the level of analyst optimism that is important for the equity market, but the change in optimism (see right-hand chart below). Somewhat surprisingly we have found that the change in analyst optimism tends to be a very good leading indicator of economic activity (it mirrors almost exactly the OECD and Conference Board leading indicators), but it is published on a far more timely basis, and more importantly it is not subject to revision in the way the economic data and leading indicators are.


Hence we note that the aggregate monthly analyst optimism data has slid below the previous lows of last year and the year before, to the sub-40% mark (see chart above). This has taken the 6-month change in optimism back into negative territory, which is beginning to drive the equity market back into bear market territory (see left-hand chart below).


My colleague Andrew Lapthorne calculates analyst optimism data on an even more timely bottom-up basis and publishes it in his weekly Global Equity Market Arithmetic- link. He notes the dramatic collapse in the US analyst optimism to below 30% for three weeks in a row! These data are entirely consistent with a US already in recession and supports that recent assertion in an interview with Lakshman Achuthan of the ECRI – link.

In short: the recession is now here, just as it was in the fall of 2011 until global coordinated easing injected trillions and masked its impact, and will manifest itself unless the global central banks step up far more aggressively and tune out reality once again (this time with a half life that will be, well, half of the prior intervention).

And now, for the main event:

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.


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Mon, 07/16/2012 - 09:04 | 2619805 bigdumbnugly
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can we get this with a vincent price voiceover?

Mon, 07/16/2012 - 09:11 | 2619832 LoneStarHog
LoneStarHog's picture

Well...okay...but only with the addition of Lady Gagme and some visual TA, and I don't mean Technical Analysis...Totally contemporary and MTV material.

Mon, 07/16/2012 - 09:21 | 2619864 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

The recession is here = King Dollar!


Rong rive King Dahrah!

It has no intrinsic value, and on the supply side, Bernanke can print as many as he could dream of.  This must be bullish!

King Rahrah! [waves hands infatically]

Mon, 07/16/2012 - 09:47 | 2619962 GMadScientist
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Short-term, yes, cash is King, and during that time it should be used to move into hard assets, for the long-term, as their nominal prices dip (you dip we dip).

This is not useful information if you do not already have Dahrah on hand, but Ancient Chinee secret is trillions of Dahrah...Benny gonna need a lotta ink and he'll hurt Ma Kettle looong before he hurts the flying monkeys.


Mon, 07/16/2012 - 09:49 | 2619970 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

You are suppossed to change the calender from year to year.  I suggest taking down the one marked "2008" and changing it with one marked "2012".

Mon, 07/16/2012 - 10:04 | 2620030 GMadScientist
GMadScientist's picture

Okay, but only if you'll flip your silver chart past early 2011.

Mon, 07/16/2012 - 10:20 | 2620079 Pinto Currency
Pinto Currency's picture


Will currency or the stock market fail first - the race is on.

Mon, 07/16/2012 - 12:14 | 2620483 zaphod
zaphod's picture

With fiat money, that chart is a massive buy signal.

The 50-month last touched the 200-month in '79 which was the start of the hugh run up to 2000. If you built it farther back, it also last touched in the mid/late '30's, which again was a great time to buy.

Under continuous QE pressure (there has always been money printing since 1913), the market bias is always up. This cross is a time to buy....


Mon, 07/16/2012 - 09:47 | 2619967 GMadScientist
GMadScientist's picture

"Tuckeses and Naynays", as Lenny Bruce would say.

Mon, 07/16/2012 - 17:04 | 2621745 max2205
max2205's picture

The 50 200 mthly emas aren't even close

Mon, 07/16/2012 - 17:37 | 2621854 Bertie Bear
Bertie Bear's picture

What! 1152 and 1141 Isn't close?

Mon, 07/16/2012 - 09:13 | 2619836 boogerbently
boogerbently's picture

It's hard to trust an article on finance/investment that doesn't know the difference between 200 day and 200 month moving averages.

I guess any "doom and gloom" is tolerated, here.

Mon, 07/16/2012 - 09:20 | 2619869 Stoploss
Stoploss's picture

Yeah, and Ben doesn't know the difference between the two types of debt, or, let alone, knows how to fight either one of them.

Just our little way of telling Ben he has trouble coming, so he can react in a reasonable time.

It could be worse, ZH could choose not to post these articles, but there's no fun in that.

Mon, 07/16/2012 - 09:42 | 2619949 narapoiddyslexia
narapoiddyslexia's picture

Well, it made me curious, but I can't find a site that has calculated the 200-month and 50-month moving averages, so I guess I'll have to download the raw data and run it though an excel formula. See, it stimulated my curiousity, so it was good for something.

Mon, 07/16/2012 - 09:48 | 2619959 Stoploss
Stoploss's picture

Same thing on daily avg's.

Just time diff, it's all the same.

Try that link.

Mon, 07/16/2012 - 12:48 | 2620638 boogerbently
boogerbently's picture

Real analysts/chartists DON'T use 200 MONTH (16.6 years) charts.

Mon, 07/16/2012 - 22:12 | 2622775 Hard Assets
Hard Assets's picture

I think you are correct, 200 months is a very long time.


What worries me more is the 12 year triple top. Could get VERY ugly !

Mon, 07/16/2012 - 09:56 | 2619996 Liquid Courage
Liquid Courage's picture

A swing and a miss!

Mon, 07/16/2012 - 09:16 | 2619848 GMadScientist
GMadScientist's picture

"The funk of 40,000 years..."

Mon, 07/16/2012 - 09:04 | 2619809 localpacific
localpacific's picture

great post some ideas for the day .. Monday Morning Market Playbook 

Mon, 07/16/2012 - 09:05 | 2619812 buzzsaw99
buzzsaw99's picture

Hilary Kramer is channeling Barton Biggs this a.m.. Break out the big guns, we want to hear from Dick Bove too!

Mon, 07/16/2012 - 09:06 | 2619815 qussl3
qussl3's picture

On the bright side, this means that THE generational buying opportunity is likely to be upon us within the next 2 years or so.

Mon, 07/16/2012 - 09:28 | 2619905 ghenny
ghenny's picture

or three or four or last year.  I tell you its random.

Mon, 07/16/2012 - 09:06 | 2619818 LoneStarHog
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The only Ultimate Death Cross will be with the death/dissolution of the Federal Reserve and PPT. Until then these morons make the charts.

Mon, 07/16/2012 - 09:09 | 2619822 LawsofPhysics
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Since no one is willing to have an adult conversation and TPTB are "circling the wagons" to protect themselves, this is what muddling through looks like.  Get used to it, I don't see any real leadership on the horizan.

Mon, 07/16/2012 - 09:16 | 2619849 bshirley1968
bshirley1968's picture

What the hell is TPTB?  I was out the day that was released.

Mon, 07/16/2012 - 09:42 | 2619946 i-dog
i-dog's picture

The Pharisees That Be.

Mon, 07/16/2012 - 09:56 | 2619995 LawsofPhysics
LawsofPhysics's picture

Hey, at least now we get to find out which bank and brokerage presidents are "in the club" and which ones aren't.  Where is John Corzine?

Mon, 07/16/2012 - 10:35 | 2620134 i-dog
i-dog's picture

Just look for Jesuits 'n Ashkenazis (same thing, actually) and you'll have your list.

Corzine is, no doubt, holed up in some Jesuit palace somewhere. Maybe this one on Long Island?

Mon, 07/16/2012 - 09:08 | 2619824 MFL8240
MFL8240's picture

Bernanke will come to the short term rescue any day now and eaveryone knows this.  He and his clown show are ready to waste more money we do not have to resurect this courpse.

Mon, 07/16/2012 - 09:19 | 2619865 bshirley1968
bshirley1968's picture

Not until the Dow breaks below 10,000.

Mon, 07/16/2012 - 09:27 | 2619896 ghenny
ghenny's picture

YOu mean Fisher and his DOW 20,000

Mon, 07/16/2012 - 09:12 | 2619833 duo
duo's picture

I talked to the manager of our office suite complex (about 20 companies occupying 2 floors).  Every single company has gone month-to-month when their lease expired.  They are all waiting until December to decide if they will stay, move, or shut down completely.  Not one is considering hiring

Mon, 07/16/2012 - 09:13 | 2619838 Quinvarius
Quinvarius's picture

Add that to all the for sale signs that just showed up on my block and you get a pretty decent reality check.

Mon, 07/16/2012 - 10:55 | 2620198 RobD
RobD's picture

The tax exemption for dept forgiveness on your short sale expires at the end of the year and the do nothing congress/senate most likely won't renew it. So its either put it on the market now and hope it closes before December 31st or you are stuck in your upside down money pit for the duration.

Mon, 07/16/2012 - 09:19 | 2619859 bshirley1968
bshirley1968's picture

What town are you in?  Detroit?  Non-news event.  Dallas?  Big story.

Mon, 07/16/2012 - 09:34 | 2619919 duo
duo's picture

Dallas. Good guess.  Obamacare will do to the TX economy what the housing bust did to FL, CA, Chicago, etc.

Mon, 07/16/2012 - 09:44 | 2619955 i-dog
i-dog's picture

You guys need to secede. We're counting on you to get the ball rolling!

Mon, 07/16/2012 - 09:58 | 2620000 LawsofPhysics
LawsofPhysics's picture

I'll second that.  Real world growth is dead, period.  States and regions with resources should do their own thing, while they still can.

Now where are those fusion reactors I ordered?

Mon, 07/16/2012 - 10:52 | 2620189 Debtonation
Debtonation's picture

A secession crisis would hasten the dollar collapse.  Obama would have to deal with a sovereignty crisis at the same time he's dealing with a currency crisis, there isn't anything he could do!

Mon, 07/16/2012 - 11:27 | 2620315 Buckaroo Banzai
Buckaroo Banzai's picture

<-- Moving to TX if/when they secede

<-- Staying put and watching from sidelines

Mon, 07/16/2012 - 09:36 | 2619934 world_debt_slave
world_debt_slave's picture

ha, ha, yeah, I was about ten years too early on going to month to month on my business space that started out as a lease. I hate leases.

Mon, 07/16/2012 - 09:16 | 2619846 Zen Bernanke
Zen Bernanke's picture

tough luck dooms dayers, it will never happen. 

Mon, 07/16/2012 - 09:19 | 2619862 GMadScientist
GMadScientist's picture

Shove that koan up your Cohen.

Mon, 07/16/2012 - 09:16 | 2619847 Poor Grogman
Poor Grogman's picture

What is an ALGO to make of this?

Mon, 07/16/2012 - 09:17 | 2619851 slaughterer
slaughterer's picture

Death cross?  Bullish!

Mon, 07/16/2012 - 09:19 | 2619852 Apostate2
Apostate2's picture



Mon, 07/16/2012 - 09:18 | 2619853 orangedrinkandchips
orangedrinkandchips's picture scary!!!


Useless shit now that this market is manipulated.....NOTHING WORKS WHEN YOU LIVE IN A VACCUM!


Indicators are just that...for show when we stay up....


hmmm....bonds (record highs/lows), the other world....down 25% avg.....BUT WE ARE AT ALL TIME HIGHS......



Mon, 07/16/2012 - 09:18 | 2619855 Fake Jim Quinn
Fake Jim Quinn's picture

Over the last 24 months we've seen Hindenberg Omens, death crosses and many of supposed vodoo charts. We're in a spate of %^$& but these charts mean nothing

Mon, 07/16/2012 - 09:21 | 2619871 GMadScientist
GMadScientist's picture

Or they are showing up despite the Fed and ECB throwing every pint-sized bazooka in their pea-brained arsenal at covering them up.

Choose wisely.

Mon, 07/16/2012 - 09:25 | 2619888 ghenny
ghenny's picture

I know what you mean.  Tyler is a smart guy.  How come he signs on to these Astrological forecasts?  Has he never read all the research from financial academia and commercial companies that shows categorically that stock market movements are random.  People simply will not give up trying to identify meaningful patterns.  Next we'll be hearing about stock movements in the entrails of animals - back to the ancient world.  Why not!

Mon, 07/16/2012 - 09:50 | 2619973 i-dog
i-dog's picture

It's a finance blog. The 'pennies in front of a steamroller' types here need pictures ... and we don't need Tyler posting photos of chicken entrails or used tea leaves every day. So chartz it iz! Suck it up.

Mon, 07/16/2012 - 10:49 | 2620176 bonderøven-farm ass
bonderøven-farm ass's picture

I'm a farmer/land surveyor by trade.  All of the financial, acronym, jargon, trade-speak, garble-tongue makes a lot more sense to folk like me with a chart or two.....


As always, thanks for all of your hard work Tyler(s) and hat tip to all of the commentators here on ZH.  My eyes are wide open...........

Mon, 07/16/2012 - 11:33 | 2620334 dirtbagger
dirtbagger's picture

Fake Jim -

These charts are eerily similar to the pattern of yellow piss marks my dog makes on the back lawn.  Should I be concerned?

Mon, 07/16/2012 - 09:22 | 2619870 razorthin
razorthin's picture

I always consult monthly charts for a 6-12 month+ forecast.  Most do not to their peril, and are left flat-footed.  The momentum indicators (especially stochastics) have been especially helpful and keep you from being suckered into being aggressively long when the market looks "oversold" in the short term.  The trick in this case is to find a tool with enough historical data to plot the 200-month MA.

Mon, 07/16/2012 - 09:22 | 2619878 MountainMan
MountainMan's picture

It's all about the slope of the average. Notice the same setup during the 75-79 period. This market is going higher.

Mon, 07/16/2012 - 09:25 | 2619887 razorthin
razorthin's picture

Monthly stochastic rolled over and pointing down at 77%.  Don't think so.  Not yet.  Need a momentum reset and a lot of pain first.

Mon, 07/16/2012 - 09:26 | 2619892 Tom Green Swedish
Tom Green Swedish's picture

Looks alot like the Gold Chart to me over the past 10 years.

Mon, 07/16/2012 - 09:31 | 2619916 ghenny
ghenny's picture

Gold is going to 2,000.  No gold is going to 1,000.  No gold is going nowhere.  We just discovered a better metal to do the jobe.  yaboo sucks.

Mon, 07/16/2012 - 09:35 | 2619931 razorthin
razorthin's picture

SPX 1400 is the massive secular resistance if it can get there within 2 months.  If not, lower still.

Mon, 07/16/2012 - 09:25 | 2619880 Tom Green Swedish
Tom Green Swedish's picture

Comparing a 6 year average to a 16 year average, interesting concept.  What is the magic S&P number? Not like I need it, just curious.  I have other better short term indicators.


We will see if it is the Ultimate and if we turn into Japan I presume.

Mon, 07/16/2012 - 09:25 | 2619889 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

The last time Edwards' "Death Cross" happened was in '45 and we moved into a 45 year bull market.  Boy this bankers and financiers are good at their jobs, huh?  Which is why everything is fiine, huh?

Mon, 07/16/2012 - 10:00 | 2620006 GMadScientist
GMadScientist's picture

You're blaming the guy for not granting a simple technical indicator that rolls over when markets turn bearish for the long-term the predictive power to forecast the US winning WWII for the allies, implementing the Marshall Plan across Europe, and becoming the export powerhouse to a world recently flatttened by the aforementioned war?

Perhaps you've been spending a little too much time in those Strawberry Fields in a Purple Haze, John-Jimi.

Mon, 07/16/2012 - 09:26 | 2619891 caimen garou
caimen garou's picture

charts and anal ist dont matter these days since anyone that manipulates anything gets nothing but a time out!

Mon, 07/16/2012 - 09:27 | 2619893 Meesohaawnee
Meesohaawnee's picture

can anyone point me to a chart that has NOT been rendered useless??

Mon, 07/16/2012 - 09:27 | 2619903 101 years and c...
101 years and counting's picture

So, the 50 may drop below the 200 in about 12-24 months.  Im on the edge of my seat!!!

Mon, 07/16/2012 - 09:31 | 2619915 Arnold Ziffel
Arnold Ziffel's picture

Dow soared 220 points on Friday...definitely a recession for some sectors but not for others:


Peugeot to Shut Plant to Raise Job Cuts to 14,000 Posts


The automaker will cut a total of 14,000 jobs, with 8,000 additional positions being eliminated on top of the 6,000 posts already announced last year, Chief Executive Officer Philippe Varin said today at a press conference in Paris.

Mon, 07/16/2012 - 09:44 | 2619957 GoingLoonie
GoingLoonie's picture

Arnold, up 220 points on literally 0 volume.  What a joke.

Mon, 07/16/2012 - 13:11 | 2620759 roonbox
roonbox's picture

you understand what "literally" means right?

Mon, 07/16/2012 - 09:32 | 2619921 London Banker
London Banker's picture

TPTB = The Powers That Be (the faceless overlords who determine our collective fate)

Mon, 07/16/2012 - 09:38 | 2619936 world_debt_slave
world_debt_slave's picture

One would think that TPTB could figure out the truth of diminishing returns.

Mon, 07/16/2012 - 09:40 | 2619944 GMadScientist
GMadScientist's picture

Shouldn't a Death Cross be associated with particularly high volume trading (as people begin the beguine of liquidation)?

Mon, 07/16/2012 - 09:48 | 2619969 one_fell_swoop
one_fell_swoop's picture

Ultimate Death Cross of Unmitigated Doom And Maybe And Definitely Not Ex-Post Curve Fitting

Mon, 07/16/2012 - 09:49 | 2619971 RobotTrader
RobotTrader's picture

Funny how nobody is talking about the "Death Cross" on gold a few months ago.

Mon, 07/16/2012 - 09:50 | 2619978 somethingisrotten
somethingisrotten's picture


Mon, 07/16/2012 - 09:53 | 2619983 GMadScientist
GMadScientist's picture

If your personal thesis is that a particular commodity market is rigged beyond rational expectations (get it?), then using technicals on it would be akin to checking your astrological chart to see how your cancer is coming along.


Mon, 07/16/2012 - 10:01 | 2620009 one_fell_swoop
one_fell_swoop's picture

Gold prices being artificially supported by the negative carry trade you mean?

Mon, 07/16/2012 - 10:07 | 2620037 GMadScientist
GMadScientist's picture

Gold prices being suppressed by the ketamine induced paralysis of the American CFTC and analogs abroad. Derivatives have made a mockery of the actual financial sector of countries the world over. It's a complete and utter farce as ridiculous as playing poker for checks with known kiters. When you can make up how short you'd like to be with respect to a commodity with no respect for the actual supply provided by the ground, you can dictate the price and their cartel position in the banking industry makes them use phrases like "fortress balance sheet", even though the most likely demise of their fortress will be a fire started within!


Mon, 07/16/2012 - 10:12 | 2620055 one_fell_swoop
one_fell_swoop's picture

Gold is a small market, if anyone were really that short, you can be sure they'd get blown out...  sounds like paranoid delusions to me...

Mon, 07/16/2012 - 10:39 | 2620141 fuu
fuu's picture

This is only your 14th comment in over 2 years.

Here is your best comment so far:

"I yearn for the day when ZH commentary reflects that of CNBC, Cramer and my more enlightened Keynesian colleagues."

Sounds like astroturfing to me.

Mon, 07/16/2012 - 10:56 | 2620200 one_fell_swoop
one_fell_swoop's picture

Yes, I am a scion of the establishment come down to spoil your gold conspiracy pity party.  *eye roll*

Mon, 07/16/2012 - 11:00 | 2620208 fuu
fuu's picture

You're the one who thinks Cramer is enlightened.

<rolls eyes>

Mon, 07/16/2012 - 12:42 | 2620609 one_fell_swoop
one_fell_swoop's picture

Haha yes, I was being utterly serious with that comment.

Mon, 07/16/2012 - 16:50 | 2621684 Catflappo
Catflappo's picture

Your forget that when using all forum boards, particularly those domiciled in the US, you MUST put "sarc" somewhere on your post, or precisely 0% of readers will have any idea whatsoever of your gently humorous intent.


Mon, 07/16/2012 - 10:43 | 2620158 AndItsGone
AndItsGone's picture

Go cash your $0.37 check from David Axelrod.

Mon, 07/16/2012 - 10:05 | 2620033 fuu
fuu's picture

McMurphy it's time for your next session.

Mon, 07/16/2012 - 09:56 | 2619992 BlackholeDivestment
BlackholeDivestment's picture

Ah, it's Count Floyd's 2012 Death Cross ay. Very scary

Mon, 07/16/2012 - 09:59 | 2620001 GERxit
GERxit's picture

Well, I don't disagree with the outcome but everybody who knows Albert (I like him) also knows this guy has been bearish since 1994... I'd rather get excited if he comes up with a BUY signal.


Mon, 07/16/2012 - 10:30 | 2620118 I should be working
I should be working's picture

"Finally ...the S&P is on the verge of an “ultimate” death cross (see chart below)... They note that the averages came close to crossing in 1978 towards the end of the 1965-82 secular bear market."

So this is wildly bullish, right?  Prices have stayed put, while earnings have greatly expanded.

Mon, 07/16/2012 - 11:50 | 2620391 robertocarlos
robertocarlos's picture

GM is making nothing but money. We don't need no stinkin' profits.

Mon, 07/16/2012 - 10:39 | 2620142 banksterhater
banksterhater's picture

that puts the S&P where it should be, 1000 or so.

Mon, 07/16/2012 - 10:45 | 2620161 SmoothCoolSmoke
SmoothCoolSmoke's picture

So, in 1978, where we are right now (the "almost cross") was long term bullish.   Hmmmmmmmmmmmmmm.

Mon, 07/16/2012 - 16:53 | 2621692 Catflappo
Catflappo's picture

yes indeed - technical analysis - what a total load of garbage!

Find something "interesting", invent a narrative, then ignore (or not even notice) any previous occurrences which negate your narrative.

So, as per my colleagues post, how are we supposed to put the 1978 convergence in our pipes and smoke it?

Mon, 07/16/2012 - 11:15 | 2620269 thechainrule
thechainrule's picture

I thought both lines had to be descending for it to be considered a death cross. 


Mon, 07/16/2012 - 11:48 | 2620385 robertocarlos
robertocarlos's picture

Gold will not hold. All hail King Dollar! Something about debts belong to us.

Mon, 07/16/2012 - 12:31 | 2620556 loveyajimbo
loveyajimbo's picture

Jamie Dimon will save the day...

Mon, 07/16/2012 - 13:15 | 2620783 roonbox
roonbox's picture

he's just so good at running a bank

Mon, 07/16/2012 - 12:51 | 2620662 Lord Koos
Lord Koos's picture

Gold just had the "death cross", but it's different for gold, right?

Mon, 07/16/2012 - 14:13 | 2621021 yogibear
yogibear's picture

Benny Bernanke and his dollar trashing crew, the other federal Reserve bureaucrats, are putting the final touches on their QE-to-infinity plan.  

They took notice of how high Zimbabwe's stock market went after the Zimbabwe dollar was turned into toilet paper and hyperinflation was triggered. 

It increased the number of billionaires significantly.  

Mon, 07/16/2012 - 14:15 | 2621030 Diamond Jim
Diamond Jim's picture

Death Crosses...double death crosses....with the Fed and Jefferies holding this market up it does not make a difference. We are stuck in the range.....

Mon, 07/16/2012 - 14:44 | 2621143 GiantVampireSqu...
GiantVampireSquid vs OWS UFC 2012's picture


Mon, 07/16/2012 - 21:33 | 2622634 deebee
deebee's picture

It's a pretty late signal to be watching, yes?
By the time it would cross where would prices be...
E.g. It occured on the DXY in May '89, almost two years after Dec '87 bottom.
And a rare occurrence is statistically insignificant (i.e. useless).

Doesn't mean all TA is useless though

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