Additionally, some observers argue the trend is a negative for stocks and the S&P 500 in particular.
“After the highly bearish trading action of late July, this is worth considering with the ‘what’s next’ question front and center for most investors,” Abigail Doolittle at Peak Theories Research said in a note. “There’s little doubt that the slicing of the S&P’s six-month uptrend was vicious, but it may be less clear what it will mean going forward. This is where the 10-year yield’s Death Cross enters the equation as a handy tool—’tell’—on what may be ahead for the S&P.”
In the past four times since 2007, a Death Cross in the benchmark Treasuries preceded significant declines in the equities market. Consequently, Doolittle believes a “formal and possibly sever correction,” or a drop of at least 10%, will occur in the S&P 500.
Investors who are wary about the equities market can consider hedging with the ProShares Short S&P500 (NYSEArca: SH), which tries to reflect the -100% daily performance of the S&P 500. SH has increased 3.1% over the past month and is down 5.8% year-to-date.
For more information on the fixed-income market, visit our bond ETFs category.
Max Chen contributed to this article.