FEAR & GREED INDEX 27
The Fear & Greed Index (found on cnn.com) is one of the easiest indicators to use to determine current market emotion. This 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 27 as of the close on Friday, August 2, 2024.
This figure dropped into “Fear” territory (close to Extreme Fear), very quickly, declining about 18 points from last Friday’s close at 45, but again that does not tell the whole story after yet another wild week on Wall Street. The gauge briefly dipped to the “Fear” level at the beginning of the week, rose to the high “Neutral” level mid-week, then dropped precipitously into the lower “Fear” level by weeks end. This move was supported by the S&P 500 decrease of 113 points, from 5,459 to 5,346.
Investor indecision continued as the “risk-on/risk-off” approach fluctuated throughout the week with the wild price action, as investors increased their expectations that interest rate cuts may begin in September, after Fed speaker Jerome’s Powell’s dovish comments mid-week. The 10-year bond yields fell under the 4% range on Thursday, for the first time in several months, and volume was heavier for the first time in weeks, indicating a return to normal.
The 7 internal factors regarding this index, noted in previous updates, are listed below:
Market Momentum (measures the S&P 500 vs its 125-day moving avg.) = FEAR Market Volatility (measured by the VIX) = EXTREME FEAR
Put to Call Ratio 5-day avg. (# of Puts (bearish) vs Calls (bullish) = EXTREME FEAR Stock Price Strength (# of new 52-week highs vs new 52-week lows) = EXTREME GREED
Stock Price Breadth (# of shares rising vs falling on NYSE) = NEUTRAL Safe-Haven Demand (which measures stocks vs bonds) = EXTREME FEAR Junk Bond Demand (non-govt. bond yield spread) = EXTREME FEAR
Five of these seven factors changed levels this week, which was not surprising due to the extreme volatility. For the second straight week, the VIX, measured by Market Volatility, experienced wild swings starting at 16.4, spiking to 17.7 on Tuesday, settling back to 16.1 after a strong market day on Wednesday, rising significantly reaching 24.1 Friday afternoon, before pulling back slightly to end at 23.3. The move signified EXTREME FEAR after two huge days of downward pressure on Thursday and Friday. The VIX has not seen these levels since February of 2022, and rose a whopping 47% from low to high during the week, a sign of fear instilled in the market. As you can see, most of these indicators are showing “fear” levels in the market. The one anomaly at the current time is the Stock Price Strength indicator, which is a bit of a diversion. As we have discussed previously, the Magnificent 7 stocks that led the markets for so long have cooled off considerably, mostly leading the downturn. However, more stocks have reached 52-week highs recently, giving the broader market healthier internal strength, as less stocks have made 52-week lows. This may be a good sign for the future when the overall market turns around, if these conditions can hold. For the time being, however, the market seems to have finally realized the economy is suffering.
Astrologically, as mentioned in last week’s edition, the Mars conjunct Uranus (Monday, July15, 2024) energies have continued to wreak havoc on the markets, as reported and expected, with violent swings in both directions (Uranus). Please refer to our Planet Power – Mars blog, dated 5-21-24, and our Trader Transits – Mars conjunct Uranus blog, dated 7-1-24, for further information. Additionally, the Saturn retrograde (which began Saturday June 29 – see Planet Power-Saturn blog dated 6-1-24), and Neptune retrograde (which began Tuesday July 2 – see Planet Power-Neptune blog dated 6-9-24) energies linger for the time being.
Leo season (which began on Monday, July 22, and lasts until August 22), is now in full swing, (further discussed in our Sign Language – Leo blog, dated 7-10-24), with many world leaders coming under attack. In the financial world, there continues to be a large increase in insider selling, which pertains to company CEO’s, high ranking individuals, and top global investors, including Warren Buffet. Remember that August and September are traditionally weak months in the market, usually preceded by volatility. The looming Mars-Jupiter conjunction (August 14th) and Jupiter-Saturn square (August 19th), discussed in our Trader Transits – Jupiter Conjunctions, dated 8-1-24, creeps closer, signifying continued volatility and a possible dip or correction, which appears to have already started, as the orb will stretch from the last week of July through early September. Also, the next Mercury retrograde period begins tomorrow, Monday, August 5 (lasting through August 27), which always seem to highly affect market volatility as well (see Planet Power – Mercury Retrograde blog, dated 4-1-24).
Continue to keep an eye on sectors including consumer staples (necessities), real estate, and healthcare (on the upside), and consumer discretionary (luxury), retail, and energy (on the downside), as so many economic indicator reports continue to be negative. Remember to keep your emotions in check, and don’t be too “proud” or stubborn (traits of Leo) regarding your positions. The volatility can be a trader’s “paradise” for the professionals, however the inexperienced may choose to be patient and wait for calmer conditions. Having cash “ready” for opportunities to purchase leading stocks at cheaper prices is not a bad strategy in current conditions. Swing traders should especially heed caution, as these swings can easily hit your “stop” levels, and make trading very difficult and frustrating.
