FEAR & GREED INDEX 48
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 48, as of the close on Friday, May 31, 2024.
This figure sits in the middle portion of the “NEUTRAL” category, moving down slightly about 5 points from last Friday’s close at 53. This was supported by the 27-point decline in the S&P 500, from 5,304 to 5,277 – a very slight decline, but basically flat. The past two weeks has now seen a decline in this gauge from 65 to the current 48, though the S&P has only lost 26 points. It also remains higher than the closing reading of 40 (in the FEAR category) about one month ago, after the index lost approximately 230 points from April 12-19, although it is drifting closer to that mark. This is a good reminder that the gauge measures investor sentiment, and not necessarily the immediate reaction in the S&P.
The “neutral” sentiment continues the slightly more “risk-off” approach with investors over the last 2 weeks. This indicator has consistently moved lower, although not sharply, over that time frame, and was ready to close at its 2-week low, suggesting investor indecision, until a sudden upward reversal in the last half-hour on Friday the 31st.
Of the 7 internal factors regarding this index, only 2 remain in the GREED category. Market Momentum (which measures the S&P 500 vs its 125-day moving average) and Safe-Haven Demand (which measures stocks vs bonds). Market Momentum was slowing, appeared to be “rolling over,” and was potentially forming a longer-term double-top (refer to Chapter 2 of our publication if you are not familiar with chart patterns), before the very late rally at the end of the day on Friday. Safe-Haven Demand had already formed a double-top over the past couple of weeks, signifying an increased demand for bonds over stocks. Remember that a decrease in demand for stocks suggest investor fear. Bond yields also rose slightly, which is usually negative for stocks overall.
The Market Volatility category (measured by the VIX), had risen to about 15, from just below 12 last Friday the 24th, which is a significant 20% rise in fear sentiment, prior to the late Friday rally that brought it back under 13. This internal factor remains in the “Neutral” stage, as does the Put to Call Ratio (Options gauge) and Junk Bond Demand.
The final 2 factors, 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), have both been falling and have now reached the Fear level.
Astrologically, as mentioned over the last 2 weeks, it was no surprise that the markets turned upward following the Jupiter-Uranus conjunction, in the sign of Taurus (symbolizing money), covered in our Trader Transits blog dated 4-3-24, which now occurred about 6 weeks ago. Both the Sun and Jupiter have now moved into the sign of Gemini, and conditions are changing, though still volatile. Gemini “season” (May 20 – June 20) often comes with turbulence (see our Sign Language – Gemini blog dated 5-8-24), and the month of June normally averages only a very slight gain by the end. Last week saw a huge upward reversal day on Friday that was not surprising, as the start of the Jupiter ingress into Gemini suggests the continuation of AI sector advances, like Nvidia and other leaders. This Friday, as noted, ended in a large upswing in the S&P 500 in the last half hour, which is very rare, especially right before a long holiday weekend.
Controlling your spending, and share size, is generally a smart approach during this season. There is also a new moon in Gemini approaching in a few days (June 6), which is discussed in our Planet Power – Moon Shine blog edition – dated 5-4-24. Remember that the new Moon often signifies short-term tops in some equities.
As conditions remain “Neutral” it is probably best for investors to utilize the “wait and see” approach, and hesitate to commit any new funds to stocks, until market direction becomes clearer, and the gauge moves much closer to an extreme. Swing-Trading for the beginner/intermediate also remains difficult with the unclear short-term trend direction.
