FEAR & GREED INDEX 45
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 45 as of the close on Friday, July 26, 2024.
This figure remained in “Neutral” territory, declining about 4 points from last Friday’s close at 49, but does not tell the whole story after another wild week on Wall Street. The gauge jumped to the “Greed” level at the beginning of the week, fell into the “Fear” level mid-week, then settled back into “Neutral” by weeks end. This move was supported by the S&P 500 decrease of 46 points, from 5,505 to 5,459.
Investor indecision continued as the “risk-on/risk-off” approach fluctuated throughout the week with the wild price action, and investors renewed expectations that interest rate cuts may begin in September. “Earnings season” (which occurs each quarter) kicked into full gear this week with mixed results. The 10-year bond yields fell to 4.19 range, after spiking mid-week, after the large stock rally on Friday. Volume was light once again, as popular summer vacation weeks continued, though it has begun to increase. Remember that price action is not as strong, or confirmed, with lower than usual volume.
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. – NEUTRAL Market Volatility (measured by the VIX) = FEAR Put to Call Ratio 5-day avg. (number of Puts (bearish) vs Calls (bullish) = FEAR Stock Price Strength (number of new 52-week highs vs new 52-week lows) = GREED Stock Price Breadth (number 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 GREED
Six of these seven factors (with the exception of Junk Bond Demand) changed levels this week, which was not surprising due to the extreme volatility. Most notably, the VIX, measured by Market Volatility, started the week at 16.5, fell below 14.5 early in the week, spiked just above 19 mid-week, and settled back to 16.4 by the end of Friday, at the FEAR level. The Put to Call Ratio also changed drastically, moving from “Extreme Greed” to “Fear,” as Puts (bearish) accumulated all week, signifying an underlying change in sentiment in the futures market.
Astrologically, as mentioned in last week’s edition, the Mars conjunct Uranus (Monday, July 15, 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 upon us, with some shifting energies as well, further discussed in our Sign Language – Leo blog, dated 7-10-24. Remember that the latter half of August and September is a traditionally weak period in the market, usually preceded by volatility. The looming Mars-Jupiter conjunction (August 14th) and Jupiter-Saturn square (August 19th), discussed in an upcoming Trader Transits blog later this week, 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 will begin on 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 real estate, healthcare, and financials, as well as energy, commodities, and Bitcoin/crypto, based on recent events and current conditions. The instances of apparent breakdowns in security measures (as well as cybersecurity) at “home” was signified in the sign of Cancer. Remember that this does not necessarily translate to new immediate investment opportunities, but are worth watching for trend recognition. Remember to keep your emotions in check, and don’t be too “proud” or stubborn (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. Swing traders should especially heed caution, as these swings can easily hit your “stop” levels, and make trading very difficult and frustrating.
Commodities, including Gold (ruled by the Sun), and Silver (ruled by the Moon), fell heavily until Friday, and have also continued to be very volatile with the constant back-and-forth sentiment changes regarding interest rates. The general premise is that when the dollar weakens, commodities will rise, as they are considered a hedge or “safe haven.” Remember that ETFs which track gold (such as GLD), and silver (such as SLV) can be used to trade the market, as an alternative to holding the physical metal. Any healthy pullback in precious metals continues to be a potential buying opportunity.
Finally, the recently mentioned U.S. market 4-year cycle (48 months), started feeling some pressure last week, and continued strongly this week. The lows of this cycle occurred in March of 2020, which is now 52 months old. Historically, it is extremely rare for highs not to be realized by the 48/49-month mark. Although a market does not officially enter bear territory until a 20% decline is reached, a 10% drop is considered a correction. The recent pullback did reach almost 5%, which is a healthy “dip”. The month of July, which is historically positive, will end this coming Wednesday, and wishy-washy August will begin. Consider taking some shorter-term profits, and proceed with caution!
***Full Disclosure: We currently hold a bullish position in SLV, since December of 2023.
***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.