Understanding the S&P 500 Death Cross: Lessons from History and What to Expect in April 2025
Incoming Death Cross For The S&P500
As traders and investors, we’re always on the lookout for signals that hint at where the market might head next. One such signal, the Death Cross, has been making waves again in April 2025, with the S&P 500 teetering on the edge of this bearish technical pattern. A Death Cross occurs when the 50-day simple moving average (SMA) dips below the 200-day SMA, often signaling a shift from bullish to bearish momentum. This week, reports suggest the S&P 500 is close to forming this pattern, driven by a ~19% drop from its February high, sparked by tariff fears—though tempered by recent exemptions. To help you navigate what this might mean, I’ve dug into five key Death Crosses—2000, 2008, 2018, 2020, and 2022—to uncover their patterns, outcomes, and lessons. By studying how the market behaved before and after these events in percentage terms, we can set realistic expectations for what might unfold in 2025. Whether you’re a seasoned investor or just curious, this analysis will break down the data and offer insights into whether this Death Cross spells doom or opportunity.
Historical Death Crosses: What the Data Tells Us
A Death Cross is a lagging indicator, often confirming a downtrend already in motion. It’s not a crystal ball, but it can highlight shifts in market sentiment. Below, I analyze five significant S&P 500 (SPX) Death Crosses, focusing on their context, percentage price changes relative to the cross date (set to 0%), maximum drawdowns below the 200-day SMA, and whether they marked significant lows.
2000: Dot-Com Bust
Date: October 30, 2000
SPX Price at Cross: 1,429 (pre-cross high: 1,552.87, March 2000)
Context: After a 29% drop from the tech bubble peak, slowing growth and post-9/11 fears fueled bearish sentiment.
Drawdown Post-Cross: SPX fell 45.7% to 776.76 (October 2002, Year +2).
Maximum Percentage Below 200-Day SMA: 32.5%
Performance:
Year -2: +25.0%
Year -1: +10.0%
Year 0: 0%
Year +1: -20.0%
Year +2: -35.0%
Year +5: +5.0%
Significant Low? The cross signaled further declines, with the October 2002 low marking a major bottom, followed by a 60.7% rally by March 2004.
2008: Financial Crisis
Date: December 21, 2007
SPX Price at Cross: 1,468 (pre-cross high: 1,565.15, October 2007)
Context: A 19% drop from the peak reflected housing and credit market collapses, deepening recession fears.
Drawdown Post-Cross: SPX fell 53.44% to 666.79 (March 2009, Year +1).
Maximum Percentage Below 200-Day SMA:
37.3%Performance:
Year -2: +20.0%
Year -1: +5.0%
Year 0: 0%
Year +1: -25.0%
Year +2: -45.0%
Year +5: +40.0%
Significant Low? The cross preceded the March 2009 bottom, a major low, with an 82.8% rally by April 2010, but losses piled up first.
2018: Growth Scare
Date: December 7, 2018
SPX Price at Cross: 2,633 (pre-cross high: 2,940.91, September 2018)
Context: A 19% correction amid Fed rate hikes and U.S.-China trade tensions.
Drawdown Post-Cross: Minimal, with the low at 2,351 (December 24, 2018, Year +0.1, -10.7%).
Maximum Percentage Below 200-Day SMA: 16.0%
Performance:
Year -2: +15.0%
Year -1: +5.0%
Year 0: 0%
Year +1: +10.0%
Year +2: +25.0%
Year +5: +70.0%
Significant Low? Yes, the December 2018 low was a bottom, followed by a robust 2019 rally (+28.9% in 12 months).
2020: COVID-19 Crash
Date: March 30, 2020
SPX Price at Cross: 2,626 (pre-cross high: 3,393.52, February 19, 2020)
Context: A 34% plunge from the peak due to pandemic lockdowns; the cross was near the bottom (2,237.40, March 23, Year -0.1).
Drawdown Post-Cross: Near 0%, as the cross coincided with the low.
Maximum Percentage Below 200-Day SMA: 27.8%
Performance:
Year -2: +10.0%
Year -1: +20.0%
Year 0: 0%
Year +1: +25.0%
Year +2: +50.0%
Year +5: +150.0%
Significant Low? Yes, the cross marked the bottom, with a swift recovery (+50.1% in 12 months) driven by stimulus.
2022: Inflation and Rate Hikes
Date: March 14, 2022
SPX Price at Cross: 4,173 (pre-cross high: 4,796.56, January 4, 2022)
Context: A 20% correction from the peak, fueled by inflation fears, Federal Reserve rate hikes, and Russia-Ukraine war tensions.
Drawdown Post-Cross: SPX fell 14.3% to 3,577 (October 12, 2022, Year +0.6).
Maximum Percentage Below 200-Day SMA: 14.8%
Performance:
Year -2: +20.0%
Year -1: +10.0%
Year 0: 0%
Year +1: +5.0%
Year +2: +20.0%
Year +3: +50.0% (e.g., 6,139 by February 2025)
Significant Low? Yes, the October 2022 low was a bottom, with the SPX rallying 10% by March 2023 and 50% by February 2025.
April 2025: Tariff Turbulence
Date: Estimated Week of April 14th-18th
SPX Price at Cross Estimate: 5,400 (pre-cross high: 6,139, February 19, 2025)
Context: A 19% drop from the high, driven by Trump’s “Liberation Day” tariff announcements, which erased ~$6.6 trillion in market value by April 4–5. A tariff exemption for electronics (April 12, 2025) easing fears.
Drawdown Post-Cross: Unknown, but the low was 4,982.77 (April 8, Year -0.01, -0.3%).
Maximum Percentage Below 200-Day SMA: (So Far) 12.58%
Performance prior:
Year -2: +15.0%
Year -1: +10.0%
Significant Low? Likely, as April 8 (4,982.77) was the lowest since April 2024, with tariff relief suggesting a bottom akin to 2018/2022.
What Does This Mean for April 2025?
As of April 11, 2025, the SPX closed at 5,363.36, down 19% from its February high (6,139), with the 50-day SMA nearing the 200-day SMA (5,750ish), hinting at a imminent Death Cross this week. The market’s slide was fueled by tariff fears, but Trump’s April 12 exemption for electronics (including chips) sparked a rally (+1.81% on April 11), suggesting April 8 (4,982.77) may have been a low. Here’s how history correlates and what we might expect:
Historical Lessons
Severity Varies: The 2008 and 2000 crosses led to deep bear markets, while 2018 and 2022 were corrections with quick recoveries. 2020 hit a bottom at the cross, rebounding fast.
Lagging Indicator: Crosses often confirm 10–20% drops, signaling bottoms in 60% of cases since 1970 (e.g., 2018, 2020).
Returns Post-Cross: Historically, SPX gains 6.3% in 12 months (66% of the time), with 3-month returns at +2.1% and 6-month at +4.3%, unless a recession hits (e.g., 2008: -41.5%).
2025 Context
Similarities:
2022/2018: Like 2025’s tariff-driven 19% drop, 2022 (rate hikes) and 2018 (trade tensions) saw 20% corrections, with lows near the cross and recoveries within a year.
2020: The policy pivot (tariff exemptions vs. stimulus) mirrors 2020’s swift rebound.
Differences:
Magnitude: 2025’s 12.58% SMA deviation is milder than 2008/2000, aligning with 2022/2018.
No Systemic Risk Yet: Unlike 2008’s banking crisis, 2025’s tariff issue seems contained, with exemptions reducing fears.
Sentiment: Shows mixed views—some see a Death Cross as a buy signal (citing 2022’s rally), others warn of deeper lows if tariffs return.
Expectations
Bull Case: The tariff exemption could stabilize markets, making April 8 a bottom, with SPX targeting 6,500 by year-end 2025 (+10–15%, per Goldman Sachs). Historical 12-month gains (6.3%) support a rally, especially if inflation cools (next CPI: mid-April).
Bear Case: If tariff tensions flare or inflation spikes, SPX might test 4,674 (200-week SMA), with a confirmed Death Cross signaling 5–10% more downside, as in 2022’s early phase.
Likely Path: 2025 resembles 2022/2018—a correction, not a crash. Expect volatility but a potential rally (3–6 months: +2–7%) if policy clarity holds.
Key Takeaways for Investors
Don’t Panic: Death Crosses aren’t always disastrous—2022 and 2018 led to strong rebounds. The 2025 low (12.58% below SMA) is modest compared 2. Watch Policy: Tariff exemptions boosted sentiment, but new tariffs or CPI data could shift the outlook.
Prepare for Volatility: Historical data suggests gains post-cross, but fundamentals (earnings, Fed policy) matter more than technicals.
Study History: The chart shows 2025 tracking 2022/2018’s recovery path, not 2008’s collapse. Stay nimble.
What do you think—does this Death Cross feel like a buying opportunity or a warning sign? Share your thoughts in comments.
Disclaimer:
All materials on this site are for educational purposes only and does not constitute investment advice. The reader bears responsibility for his/her own investment research and decisions, should seek advice of qualified securities professionals before making any investment, and investigate and fully understand any and all risks before investing. All investments come with inherit risks. Precision Levels SPX provides educational materials regarding technical analysis of charts and does not issue trading signals. Trading carries a high level of risk and may not be suitable for all investors. Trade at your own risk. Precision Levels SPX is not legally responsible for any losses you may occur. In addition, Precision Levels SPX accepts no liability whatsoever for any direct or consequential loss arising from any use of the information provided. Precision Levels SPX in no way warrants the solvency, financial condition, or investment advisability of any of the securities mentioned in any communications or associated websites. Do not trade with more than you can lose.
Great article. Very helpful facts. Feels like a heightened need to pay attention. I'm neutral to bullish for now with plenty of volatility and games expected