FEAR & GREED INDEX 41
The Fear & Greed Index (found on cnn.com) is one of the easiest indicators to use to determine current market emotion. The simple to read gauge, highlighted in our publication When to Buy and When to Sell: Combining Easy Indicators, Charts, and Financial Astrology - available on Amazon, is measured in a range from 0-100, and currently reads 41, as of the close on Friday, June 21, 2024.
This figure sits around the upper edge of the “FEAR” category, just beneath “neutral,” up about 3 points from last Friday’s close at 38, which is not very significant in the shortened trading week (markets were closed Wednesday for the holiday). This was supported by the slim 33-point gain in the S&P 500, from 5,431 to 5,464. The gauge, which had been steadily declining the past few weeks, basically held steady. This week started positively with a combined gain of about 56 points on the S&P Monday and Tuesday, then fell back about 23 points on Thursday and Friday.
The “risk-off” approach with investors over the last few weeks did not change very much as the markets stabilized following last week’s Fed chair Jerome Powell’s announcement of a “hold” on interest rates, with an expectation of only one rate cut through the end of the year. Bond yields also held steady around 4.2 to 4.3. As the internal factors in the market continue to deteriorate, it continues to be held up by only a few powerhouse companies like Apple, Nvidia, Microsoft, and Google, although those equities showed weakness on Thursday and Friday. Sectors including Energy, Precious Metals, Real Estate, and Cryptocurrency have recently experienced declines as well, inciting some extra “fear” across the board.
Of the 7 internal factors regarding this index, only Market Momentum (which measures the S&P 500 vs its 125-day moving average) remains in the EXTREME GREED category, as the Put to Call Ratio (the Options gauge that compares the number of Puts vs the number of Calls – currently reading 0.73) dropped slightly to GREED. The market remains distorted (as mentioned in last week’s update), as Puts (bearish option strategy) would normally be higher in a “fear” sentiment environment. Puts are dangerously low at the current time, which could create a steeper fall should the overall markets start to correct.
Stock Price Strength (number of new 52-week highs vs new 52-week lows), and Stock Price Breadth (number of shares rising vs falling on the NY Stock Exchange), remain in EXTREME FEAR level, further indicating the upward trend is not as healthy as it appears, while Safe-Haven Demand (which measures stocks vs bonds) has slipped to FEAR, with bonds a bit stronger. Although this does not indicate a major crash, it does suggest continued caution.
The Market Volatility category (measured by the VIX) remains “Neutral,” with no clear market direction. The VIX did rise, however, from 12.6 to 13.1, a slightly less than 4% increase in volatility, as the market was relatively calm. This gauge continues to be very low historically, which suggests caution, as dips and possible corrections often follow (even if only short-term). An interesting fact is that the S&P 500 has not experienced a rise, or fall, of over 2.15% in any one session in over a year, despite a few periods of clear volatility.
Astrologically, as mentioned over the last few weeks, the Jupiter-Uranus conjunction (April 20), in the sign of Taurus (symbolizing money), covered in our Trader Transits blog dated 4-3-24, themes and energies will remain, as both are slower moving planets (especially Uranus). The Gemini “season” push and pull characteristics (dual personality of the symbolic “Twins”) continued to affect a market looking for direction. Cancer “season” (when the Sun is positioned in the sign of Cancer from June 20 – July 21) officially began on Thursday (June 20), when the focus often turns to emotion, intuition, and protection (see our Sign Language – Cancer blog dated 6-8-24). As the month of July has seen the 2nd best monthly returns over the past few decades, gains are expected to resume at a steady pace. Beware the Saturn retrograde (June 29)(refer to Planet Power - Saturn blog dated 6-1-24), and Neptune retrograde (July 2)(refer to Planet Power - Neptune blog dated 6-9-24) this year, however, as they may interrupt and restrict these gains. Equities, gold, and oil could be heavily influenced.
As noted last week, the sign of Cancer (ruled by the Moon) signifies the home and family, which financially can relate to real estate, jobs, and personal finance. Remember that this does not necessarily translate to new investment opportunities, rather these sectors will be in focus, and may be tradable in either direction.
The full moon (in Capricorn), occurred on Friday (June 21), which is discussed in our Planet Power – Moon Shine blog edition – dated 5-4-24. Remember that the full Moon often signifies short-term bottoms in some equities. As always, keep your emotions in check when contemplating investments of all types, which is challenging in the sign of Cancer. Silver (also ruled by the Moon), right on cue, gained significantly on the first day of Cancer season, however did reverse on Friday, back to the level it was trading at all week. A healthy pullback would appear to be a potential buying opportunity.
Additionally, the market is currently extended regarding its 4-year cycle (48 months). The lows of this cycle occurred in March of 2020, which is now 51 months old. Historically, it is extremely rare for highs not to be realized by the 48/49-month mark. As market sentiment remains in the “Fear” category, it is probably best for investors to continue the “wait and see” approach, although a drop to Extreme Fear levels would indicate oversold conditions and potential “buying the dip” opportunities. Volume should also remain low the first week of July, due to the market closure for the 4th of July holiday, and the annual popular vacation week.
