FEAR & GREED INDEX 53
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 53, as of the close on Friday, December 6, 2024.
This figure now sits at the far edge of the Neutral level, after closing in the mid-Greed last week. The gauge fell 13 points from last Friday’s close of 66, while the S&P 500 increased about 58 points from 6,032 to 6,090, remaining well above 6,000. The S&P 500 and the Nasdaq again hit new All-Time Highs this week, while the Dow Jones Industrial Average slipped a bit, creating slight divergence. Please note that, despite the gains in the S&P, the gauge fell a full 13 points, the opposite direction one would expect. Remember the 7 internal factors are consistently re-calculated, and as a result, this week, the perceived market “value” has increased, causing the lower reading. Remember this index is sentiment based, not fundamental based.
Consistent with these readings, the “Risk-On” sentiment resumed, due to another technology sector turnaround, improvement in bond prices, and strong seasonality. The 10-year bond yields, finally dropped a bit, to 4.18%, as the expectation of another Fed rate cut at the December meeting nears. 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.
The 7 internal factors used to formulate this index are listed below:
Market Momentum – (S&P 500 vs its 125-day moving avg) = EXTREME GREED
Market Volatility (measured by the VIX) = NEUTRAL
Put to Call Ratio 5-day avg. (# of Puts (bearish) vs Calls (bullish) = EXTREME GREED
Stock Price Strength (# of new 52-week highs vs new 52-week lows) = FEAR
Stock Price Breadth (# of shares rising vs falling on NYSE) = FEAR
Safe-Haven Demand (which measures stocks vs bonds) = FEAR
Junk Bond Demand (non-govt. bond yield spread) = FEAR
Only three of the 7 factors changed levels this week, once again led by Stock Price Strength, which slipped another notch to Fear sentiment suggesting less stocks contributing to the market rise. Stock Price Breadth remained in Fear, suggests the same. As Market Momentum remains strong, the 7 indicators aren’t totally in sync, confirming the price move is not widespread. The above mentioned divergence also indicates that we need to be selective with stock choice.
The VIX, measured by Market Volatility, continues to remain in Neutral territory, as it declined from 13.5, to a close of 12.8, supporting the rise in the S&P 500. This gauge is creeping down toward historic lows, which can often result in a market pullback. If the VIX remains low and bonds don’t reverse again, this historically strong time of the year for the market gains will continue. Continue to keep an eye on bond market action as it tends to affect the overall market sentiment.
The major weekly news included Bitcoin’s break above $100,000. The landmark was met with euphoria as it quickly, but momentarily surpassed $105,000, then just as quickly dipped back to the mid-$90,000’s. The phenomenon continues, and many are benefitting from the rise in cryptocurrencies. There is also often a rise in Altcoins following a large move in Bitcoin, and XRP (also known as Ripple) also experienced a recent surge, after court cases were settled in their favor. Last week’s Black Friday record $10.8 billion spent online continued to carry sectors like Retail and Consumer Discretionary. This is another odd report as many are struggling to pay bills, and record amounts of credit card debt exist. 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. Be cautious regarding these sectors after the holidays.
Astrologically, the recently discussed Uranus and Mars planetary energies remain in effect, with the technology sector continuing its aggressive/sudden changes of direction as earnings season has come to an end. Mercury Retrograde, will conclude next weekend and, true to form, it has resulted in inconsistent and unpredictable price action. Mercury Retrograde (discussed in many recent blogs and our publication), normally wreaks havoc on the market with raised volatility and no clear or consistent price direction - so beware and watch your trading stop-loss levels. Mercury will then go “direct” on December 15, in time for the expected annual Santa Claus rally (also discussed in our publication) later in the month. Sagittarius “season” (with the Sun in that sign) provides a further boost, as it normally results in favorable market price action, as optimism rules during the holidays.
The planet Venus (money) has now exited the sign of Capricorn (restrictive and cautious), and entered the sign of Aquarius (free and liberating). While the planet Saturn, rules both signs, it tends to be more restrictive in Capricorn, and more abundant and unconventional in Aquarius, which symbolizes technology and cryptocurrencies (please see our recent Trader Transits – Venus in Aquarius blog, dated 12-2-24).
The Mars Retrograde also began two days ago, Friday, December 6, a few days prior to the end of Neptune retrograde, occurring tomorrow, Monday, December 9. This will also likely continue the increased volatility this year. The ever-present threat of global conflict also lingers, related to Mars, as well as deceptive practices, related to Neptune, so continue to be cautious and very selective with stock choice.
Continue to look for sectors such as financials, defense, and cryptocurrencies to be strong. Communications and technology related stocks may continue their volatility with the Mercury Retrograde still in effect. Certain subsectors of the technology industry are likely to advance into the future as well, including AI, robotics, 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), ended their pullbacks this week, but it remains to be seen if a new bull pattern will form or it is just a bear flag. Post election, the financial sector gained based on the strengthening dollar and the surge in Bitcoin, driving 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.
