What CNNMoney Fear & Greed Index is Saying About the Stock Market Now
It can be helpful for investors to maintain a pulse on investor sentiment so as not to succumb to one of the enemy of returns; emotion. CNNMoney has developed a Fear & Greed Index based on seven indicators. Like the Tactical Timing System Fear Index featured here, CNNMoney’s index can be used to thoughtfully temper the response to market movements resulting from widespread enthusiasm or disdain for the stock market.
From the CNNMoney website they determine investor sentiment from seven indicators (five of which happen to be incorporated in various reiterations in the TTS Fear Index):
•Stock Price Momentum: The S&P 500 (SPX) versus its 125-day moving average
•Stock Price Strength: The number of stocks hitting 52-week highs and lows on the New York Stock Exchange
•Stock Price Breadth: The volume of shares trading in stocks on the rise versus those declining.
•Put and Call Options: The put/call ratio, which compares the trading volume of bullish call options relative to the trading volume of bearish put options
•Junk Bond Demand: The spread between yields on investment grade bonds and junk bonds
•Market Volatility: The VIX (VIX), which measures volatility
•Safe Haven Demand: The difference in returns for stocks versus Treasuries
CNNMoney’s Fear & Greed Index is based on a scale from 0 – 100. Currently the index shows a reading of 84 indicating ‘extreme greed,’ or a time when investors might be wise to reign in their enthusiasm towards the stock market. The source link below identifies several historical readings of the Fear & Greed Index, such as those that occurred during the onset of the financial crisis and the reading at the market bottom in 2009.
The TTS Fear Index currently shows a reading of 3.0 on a scale from 1-10; not a record reading of greed, but indicating the market could be increasingly vulnerable to a set-back at any time.