Financials Flash the 'Death Cross': When the 50-Day MA Casually Ghosts the 200-Day

The S&P 500's financial stocks had a Tuesday to forget on March 17, painting their first 'Death Cross' since last October. For the uninitiated, this is the chart pattern equivalent of your short-term optimism swiping left on your long-term trend, signaling momentum is getting cold feet and downside risk is sliding into the DMs.

While Death Crosses are less a crystal ball and more a confirmation that the party is already winding down, history loves to rub it in. The last ghosting happened in November 2023, just as financials were tentatively peeking out from a brutal slump that started in 2022—thanks for that, Fed rate hikes.

What followed that last cross was the 2023 banking sector stress saga, starring regional bank failures. A similar plot twist unfolded in April 2022, after the 50-day average had been faithfully above the 200-day for a solid year. The sector then proceeded to faceplant, dropping 18% before finding a floor about six months later—a classic case of "trust the process," until you can't.

Financial stocks aren't just lagging; they're underperforming the broader S&P 500 so badly that their relative strength has time-traveled back to late 2020's COVID-recovery levels. This suggests their struggles are more of a feature, not a bug from recent market jitters.

This whole situation is raising eyebrows that the economic cycle might be doing a sneaky pivot. Current pain points include cozying up to private credit markets and the potential macro headache from rising oil prices—because what's a crisis without an energy crunch?

Goldman Sachs research notes hedge funds started hitting the sell button more aggressively across banks, insurers, fintechs, and trading firms in the week through March 13. These funds went full degen, 'aggressively shorting' financial stocks last week, with the sector seeing net selling from London to Tokyo.

The market's performance is, unsurprisingly, reflecting all this pressure. However, some analysts are playing copium dealer, suggesting the rising short interest might be more about broad-market hedging theatrics than a outright bear raid on bank stocks themselves.