Death and golden crosses are trend-following signals. Natural gas, however, is one of the most mean-reverting commodities.
The death cross and golden cross occur when a market’s 50-day moving average crosses below or above its 200-day moving average. Their purpose is to confirm that a directional trend has taken hold.
Natural gas is one of the least suitable markets for this type of signal. It is the most mean-reverting of the major commodities and is known as the widow maker for the speed and violence of its reversals.
We examined every 50/200-day cross on Henry Hub natural gas futures since 2000, which included 21 golden crosses and 21 death crosses, and measured price behavior before and after each one. The signals tended to fire late and frequently pointed in the wrong direction.
A golden cross is intended to signal a shift from a downtrend to an uptrend.
On natural gas it has done the opposite. In the month after the 21 golden crosses since 2000, prices fell a median 5.4% and closed higher only 29% of the time.
Because golden crosses are a lagging signal, it typically confirms an uptrend only after a substantial rally has already occurred. Mean reversion then takes hold, pulling prices lower.
If the golden cross tends to mark the top, the death cross has often marked the bottom. After the 21 death crosses since 2000, natural gas was roughly flat over the following month, with a median return of −0.5%.
Actually, several of the largest rallies began immediately after a death cross. In August 2024 a death cross at $1.96 was followed by a 105% rally over the next six months. In February 2022 a death cross preceded a 99% surge in sixty days.
| Time Frame | After a golden cross | After a death cross | Any day (baseline) |
|---|---|---|---|
| 1 month | -5.4% (29% up) | -0.5% (48% up) | +0.0% (50% up) |
| 2 months | -5.8% (43% up) | +0.3% (52% up) | -0.1% (50% up) |
| 3 months | -0.6% (48% up) | -0.1% (50% up) | +0.4% (51% up) |
If the crosses do not signal direction, what do they signal? The seasons. They are not scattered randomly through the year. Golden crosses cluster in October, November, and December as prices climb into winter heating demand. Death crosses cluster in July and August, the shoulder-season lows. The 50/200-day cross on natural gas is, more than anything, a slow seasonal clock.
A trend signal needs a trending market. Natural gas is the opposite of one. The golden cross marks the top, the death cross marks the bottom, and the only thing the pair reliably marks is the turn of the seasons.
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