Nathan Worden's avatar
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Fear and Greed Index crosses into 'Extreme Fear'
Today, the Fear & Greed index closed down 10 points, the first time we've been in the 'Extreme Fear' category since October 2022:

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About a month ago, on Feb. 2nd, we were all the way up at 78, in the Extreme greed range. It's crazy how fast things can change. But if you look at the last year, we've actually done an up-down cycle like this five times:
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The Fear & Greed index is based off of 7 indicators. The first is Market Momentum: Is the S&P 500 above or below its 125-day moving average( and by how much)? We just crossed below it:

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The second indicator is Stock Price Strength, which is still in the Greed. There are currently more stocks on the NYSE at 52-week highs compared to those at 52-week lows:
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But its all fear from here. The third indicator is Stock Price Breadth. The amount, or volume, of shares on the NYSE that are rising compared to the number of shares that are falling. A lower number is bearish.
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The put and call ratio is climbing fast (puts are the option to sell while calls are the option to buy. When the ratio of puts to calls is rising, it is usually a sign investors are growing more nervous)

The VIX has spiked:
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Bonds have outperformed stocks over the last 20 days:
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A wider spread between junk bonds vs. investment grade bonds shows more caution.
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Excessive fear tends to drive down share prices.

Hello darkness, my old friend.
Jazzi Young's avatar
Oh wow, this is terrific Nathan !
All these decades in the market and I never bothered to find out what the components were that went into the Fear & Greed Index.
I had just assumed it was like AAII's Sentiment Survey where they just surveyed a cross section of investors and institutions :). There's actually a science to it !
There's that saying about an old dog still learning new tricks :)
Nathan Worden's avatar
@jazziyoung yeah! Knowing the factors that go into it actually make me respect it more. I donโ€™t use it to trade & invest per se, but it is extremely good background info. It did help me invest smaller amounts in 2021 when the market was greedy. (Although I did not invest larger amounts in 2022 when the market was greedy. Still, it was helpful).

Glad the info was useful!
StockOpine's avatar
Welcome darkness. Bring some discounts ๐Ÿ˜
Nathan Worden's avatar
@stockopine there we go! Silver lining ๐Ÿ˜„ ๐Ÿฅˆ๐ŸŒฅ๏ธ
Todor Kostov's avatar
@nathanworden Great post with excellent visuals.
Nathan Worden's avatar
@kostofff thanks Todor!
Arnaldo Trezzi's avatar
The simplest most effective indicator imo!
Nathan Worden's avatar
@arny_trezzi I love indicators that are straightforward and easier to understand :)
Dissecting the Markets's avatar
Even with all the panicking, stock price strength remains the bright spot. It's ironic.
Nathan Worden's avatar
@dissectmarkets yeah thatโ€™s quite an odd juxtaposition ๐Ÿ™ƒ
Hedge Vision's avatar
Havenโ€™t checked in a while, thought it was still around 50! Good to know though ๐Ÿ‘€
Simon Handrahan's avatar
very interesting indeed

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