S&P 500 Financials Form First Death Cross Since October 2023

Edgen Stock·Mar 17 2026, 11:20

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Key Takeaways

The S&P 500 financial sector has formed a significant bearish technical pattern known as a 'Death Cross' for the first time since October 2023. This indicator, which signals potential for a major downturn, gains relevance from historical precedent and current market positioning.

Bearish Signal Confirmed: On March 17, the financial sector's short-term moving average fell below its long-term moving average, forming a Death Cross.
Historical Precedent: A similar technical setup in April 2022 was followed by an 18% decline in the sector over the subsequent six months.
Weakness Amplified: The signal appears as the sector's relative strength versus the S&P 500 hits its lowest point since late 2020, and hedge funds were reported to be aggressively shorting financials in the week ending March 13.

Bearish Technical Signal Emerges for First Time Since October 2023

On March 17, the S&P 500 financial sector flashed a significant bearish warning sign by forming a 'Death Cross' technical pattern. This event, where the sector's short-term 50-day moving average crosses below its long-term 200-day moving average, indicates weakening momentum and growing downside risk. It marks the first such occurrence for the sector since October 2023, a period that preceded the regional banking stress.

April 2022 Precedent Points to Potential 18% Decline

Historical data provides a compelling case for investor caution. A comparable technical setup occurred in April 2022, when the 50-day average had also stayed above the 200-day for more than a year before crossing below. In the aftermath of that 2022 Death Cross, the financial sector plummeted 18% before establishing a market bottom approximately six months later. This precedent suggests the current signal could foreshadow a prolonged period of underperformance for banking and financial services stocks.

Relative Strength Hits Late-2020 Low as Shorts Increase

The technical weakness is reinforced by the sector's broader market underperformance. The relative strength of financial stocks compared to the S&P 500 has dropped to levels not seen since the COVID-era recovery in late 2020. This indicates the sector's struggles extend beyond recent volatility. Further pressuring the sector, research from Goldman Sachs revealed that hedge funds were aggressively shorting financial stocks in the week through March 13. This bearish positioning highlights concerns over the sector's exposure to private credit markets and the macroeconomic impact of rising oil prices.