FEAR & GREED INDEX 28
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 28 (reaching a low of 21 on Thursday – Extreme Greed), as of the close on Friday, December 20, 2024.
This figure now sits in the lower area of the Fear level, plunging 22 points from last Friday’s close of 50, while the S&P 500 declined about 121 points from 6,051 to 5,930. The earlier drop to 5,872 on Wednesday, when the index fell 178 points, was tempered with a 63-point rise on Friday. This resulted in a pullback from all-time highs on the Nasdaq, Dow Jones Industrial Average, and the S&P 500. After reaching Extreme Greed, however (as we often discuss), the indices rallied and recovered some of Wednesday’s losses.
Consistent with these readings, the “Risk-On” sentiment evaporated, even if only for a short time, as the riskier assets immediately fell out of favor on Wednesday, when Federal Reserve Chairman Jerome Powell cut rates 0.25%, but hinted at less rate cuts in 2025 than originally perceived, with the following statement – “If the economy does evolve about as anticipated, we’re at a point at which it would be appropriate to slow the pace of rate cuts.” This announcement sent shock waves through the market late in the afternoon, causing the large decline, and a sudden “Risk-Off” sentiment. 10-year bond yields remained high, rising from 4.38% to 4.53%, which also was not favorable for stocks. As we have noted for several weeks, Fed rate cuts generally result in an increase in bond prices, not the decrease we have recently experienced. Fed Chairman Powell’s comments, consistently unclear and confusing, included others including “Our policy stance is now significantly less restrictive” and “We can now therefore be more cautious as we consider further adjustments to our policy rate.” When asked if he may raise rates next year he quipped “You don’t rule things completely in or out in this world, but that doesn’t appear to be the likely outcome.” One final confusing quote was “For additional cuts, we’re going to be looking for further progress on inflation.” As usual, the entirety of his comments are non-committal and contradictory, as actual reported inflation numbers do not reflect any “progress.”
The 7 internal factors used to formulate this index are listed below:
Market Momentum – (S&P 500 vs its 125-day moving avg) = FEAR
Market Volatility (measured by the VIX) = NEUTRAL
Put to Call Ratio 5-day avg. (# of Puts (bearish) vs Calls (bullish) = FEAR
Stock Price Strength (# of new 52-week highs vs new 52-week lows) = EXTREME FEAR
Stock Price Breadth (# of shares rising vs falling on NYSE) = EXTREME FEAR
Safe-Haven Demand (which measures stocks vs bonds) = FEAR
Junk Bond Demand (non-govt. bond yield spread) = FEAR
Four of the 7 factors changed levels this week, with Market Momentum and the Put to Call Ratio finally succumbing to the pressure, and falling from Greed to Fear. Combined with Stock Price Strength and Stock Price Breadth remaining in the Extreme Fear level, reflecting less stocks contributing to the recent market rise. Safe-Haven and Junk Bond demand both also slumped back to Fear (where they were 2 weeks ago), as the 7 indicators are now more in sync to the negative side. This indication that the market was not entirely healthy has also been reflected by the Dow Jones’ 10-day losing streak (the first time since 1978). As recently mentioned, the signs of weak overall conditions indicates that we need to continue to be very selective with stock choice.
The VIX, measured by Market Volatility, had a wild week beginning on Wednesday afternoon (after Powell’s comments), though it calmed somewhat by Friday. Although it continues to remain in Neutral territory, it spiked to the mid-20’s on Wednesday, from 13.8, only to drop significantly again on Friday, closing at 18.5. As we had mentioned in the last several weeks, the low reading on the VIX suggested a potential rise in volatility, which did occur, sparked by Powell’s comments. The bond market action also remained disjointed, as it appears not be convinced with the Fed’s suspect monetary policy, as bonds normally rise with rate cuts. The decline in strength and breadth mentioned above also suggests “weak” overall market internals, and we continue to advise caution moving forward, despite this historically strong time of year.
This week’s highlight was the Federal Reserve meeting. Powell’s comments caused a late afternoon plunge in all equities, including stocks, bonds, commodities, and cryptocurrencies, almost entirely erasing the post-election rally. This again begs the question that if the economy is so strong, why the recent rate cuts? Also, basically nothing has changed with Leading Economic Indicators in the past 8 weeks, so why has the outlook changed to reduce future rate cuts. It was a clear mistake to cut rates in October (especially .50%), as it all seems very politically motivated. The continuing struggle with record high debt, defaults, and the cost of living, questions the underlying “strength of the economy.” The recent Black Friday record $10.8 billion reported spent online also continued to carry sectors like Retail and Consumer Discretionary, though the combination of more expensive items, and those more fortunate continuing to spend, may be skewing these numbers to appear better than they really are. Cracks in these sectors started to show this week, so be cautious regarding these stocks after the holidays. Whether Friday began the annual Santa Claus Rally remains to be seen. Quarter-end window dressing and fund manager end of year bonuses are now in play as well (also discussed in our publication) so do not be surprised by a short rally.
Astrologically, the recently discussed Uranus and Mars planetaryenergies remain in effect, with the technology sector continuing its aggressive/sudden changes of price direction. Mercury did end its retrograde on the 15th (just in time for the expected annual Santa Clausrally), and the markets did “calm” until the Fed Meeting. Capricorn “season” (with the Sun in that sign) has now replaced Sagittarius “season” (see our Sign Language – Capricorn blog, dated 12-6-24), as of Friday. Capricorn season traditionally hosts the end of the year “rally,” which can extend into January. Price action normally calms down however, as the final push for end of year results is complete. January is historically an important month, however, as many investors believe that “As January goes, so goes the market.” There are many years past that the direction of the equities market in January carry through until the end of that year.
The planet Venus (money), which entered the sign of Aquarius (free and liberating) last week, was initially met with technology and cryptocurrency gains ((please see our recent Trader Transits – Venus in Aquarius blog, dated 12-2-24) as expected, prior to Wednesday’s late afternoon plunge. Look for more possible reversals in the short term.
The Mars Retrograde, now in full effect, remains in the sign of Leo until January 6, when it moves back to the sign of Cancer. The planet Neptune went “direct” last Monday, December 9, and this combination will likely continue the increased volatility with the ever-present threat of global conflict (related to Mars). Many “hidden truths” and “deceptive practices” have continued to be uncovered (related to Neptune). The 2nd leg of the current Jupiter square Saturn rotation also took effect on Tuesday, December 10, consistent with a push and pull theme in price action.
Look for sectors such as financials, defense, retail, communications, technology, and cryptocurrencies to be in focus. In the longer term, certain subsectors of the technology industry are likely to advance into the future as well, including AI, robotics, quantum computing, and space development (Pluto in Aquarius). Also, the airlines/travel/retail sectors have shown recent strength, but could be affected if oil rises, or holiday spending is lower than expected.
Gold (ruled by the Sun), and Silver (ruled by the Moon), continued their recent downturns until Friday, as Mars retrograde in Leo (also ruled by the Sun) energies remain. Also, the recent Bitcoin surge has put pressure on commodity prices down due to the “rotation” into crypto. The president-elect had a lot to do with this move, as he has made many promises favoring cryptocurrencies. As noted last week, the decline in metals will more than likely be short-lived (as the dollar strength may be temporary) and they continue to be long-term buying opportunities on any pullbacks.
***As always, this information is not intended to be financial advice, or any specific buy or sell recommendation, but rather a guide to assist the reader in some further understanding of current economic conditions/movements in the sky, and how they can affect moods, behaviors, world events, and financial markets.
