FEAR & GREED INDEX 34
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 34 as of the close on Friday, December 27, 2024.
This figure now sits in the middle area of the Fear level, rising 6 points from last Friday’s close of 28, while the S&P 500 increased about 39 points from 5,930 to 5,969, in a wild holiday-shortened week on Wall Street. The S&P 500 saw significant gains of 169 points just before the holiday, and a sudden reversal of 68 points after. The Nasdaq and Dow Jones Industrial Average experienced the same gyrations, following similar patterns.
Consistent with these readings, the “Risk-On”/ “Risk-Off” sentiment fluctuated heavily from the beginning of the week to the end, still feeling the effects of Federal Reserve Chairman Jerome Powell 0.25% rate cut the previous week, and his “hawkish” (non-favorable) forward-looking statement regarding future cuts. The 10-year bond yields remained high, rising slightly to 4.59%, from 4.53%, as bonds themselves continued to falter, 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 remain consistently unclear and confusing, and are not representative of the real current economic conditions.
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) = GREED
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) = NEUTRAL
Junk Bond Demand (non-govt. bond yield spread) = FEAR
Only 2 of the 7 factors changed levels this week, with the Put to Call Ratio jumping back to the Greed level after finally succumbing to pressure last week, when it fell from Greed to Fear. This suggests some bullish sentiment going forward, however Stock Price Strength and Stock Price Breadth remaining in the Extreme Fear level, reflecting less stocks contributing to the recent market rise. Safe-Haven Demand also rose, from Fear to Neutral, as commodities began to rise slightly. As 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 another wild week, spiking over 18 twice during the week, from 13.8, before settling back to 15.9 by weeks end, technically remaining in Neutral territory. As we had mentioned in the last several weeks, the low reading on the VIX suggested a potential rise in volatility, which did occur, and we continue to advise caution moving forward, despite this historically strong time of year.
This week’s news included more negative economic readings, including manufacturing and durable goods orders. In addition, the continuing struggle with record high credit card debt, defaults, and the cost of living, questions the underlying “strength of the economy.” The Retail ETF (XRT), which peaked in mid-December, has also started to fade, as we warned. Be cautious regarding these stocks after the holidays, as there was also a report that “luxury” item spending has decreased. The annual Santa Claus Rally hit a wall on Friday as well, and may be cut short until after the new year. Quarter-end window dressing (where fund managers add winning stocks and subtract losing stocks from their holdings), which will now turn into Quarter re-balancing (where they adjust each holding’s percentage/weight of the total account), and fund manager “end of year” bonuses, continue to be in play for a few more days, as well as the January Effect (also discussed in our publication). Do not be surprised by a short new year rally (when funds tend to add new money) in strong stocks and a decline in weak stocks.
Astrologically, the recently discussed Uranus and Mars planetary energies remain in effect, with the technology sector continuing its aggressive/sudden changes of price direction, again on display this week. Santa appeared to arrive early, but took away some presents right after the holiday. Capricorn “season” (with the Sun in that sign), which traditionally hosts the end of the year “rally,” has now set in, but these retrograde energies continue to wreak havoc. As mentioned last week, January is historically an important month as many investors believe that “As January goes, so goes the market.” This is otherwise known as The January Effect (also discussed in our publication), as the direction of the equities markets in January have continued through until the end of that year on many occasions.
The planet Venus (money), will end its short stay in the sign of Aquarius (free and liberating) on January 3rd, when it will then enter the sign of Pisces, symbolizing more confusion, illusions of grandeur, and idealism. However, it also represents hidden factors, fantasy and delusion. Look for more possible reversals and volatility 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 turned direct on 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), which now blends with the Venus in Pisces theme. 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 Consumer discretionary, financials, defense, retail, communications, technology, and cryptocurrencies to be in focus, again with heightened volatility. 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, and Uranus ingress Gemini mid-2025). 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 “indecisive” price action, along with Crude Oil and the U.S. Dollar, 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, and the two now seems to move in opposite directions. The president-elect had a lot to do with this move, as he has made many promises favoring cryptocurrencies, and his implementation of possible global tariffs linger. 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.
