CNN "Fear & Greed Index"

[GreenEggs]

I'm sure this isn't news to a lot of you, but I just discovered it and thought it might be useful or interesting to some of the folks here.

https://money.cnn.com/data/fear-and-greed/

I've definitely bought at market highs, so maybe this will help avoid that in the future

 

[OldShooter]

If it worked the people that put it together wouldn't be giving it away for free. They would be quietly trading for their own accounts.

 

[Winemaker]

Any one who is describing some one else's behavior as greedy, is either green with envy, or kicking themselves that they weren't smart enough to participate.

 

[TheWizard]

Any one who is describing some one else's behavior as greedy, is either green with envy, or kicking themselves that they weren't smart enough to participate.

FOMO, checko.
I dislike putting new money into stock funds at record highs, so I understand that part.

Starting year nine of retirement, the only new money I have is excess retirement income going into my taxable account.
My AA for that account is approximately 95% stock funds and 5% cash.

But my situation is a bit odd, so let's talk about something else...

 

[target2019]

I thought Green meant Good (and Red meant Bad).

 

[GravitySucks]

I thought Green meant Good (and Red meant Bad).

Greed is Good
---Gordon Gecko

 

[Midpack]

Doesn’t this, swinging wildly within a year, tell you why it’s a useless metric to long term investors (most here)? It’s another hindsight indicator at best...

 

[Dtail]

Doesn’t this, swinging wildly within a year, tell you why it’s a useless metric to long term investors (most here)? It’s another hindsight indicator at best...

Yup, it goes from greed to good and vice versa multiple times a week at times.

 

[NW-Bound]

Yup, it goes from greed to good and vice versa multiple times a week at times.

It's well known that the market is schizophrenic.

A medical Web site has this to say: "Treatment can help, but this condition can't be cured".

 

[Amethyst]

Geckos are good.

---Gordon Green

(I like geckos.)

Greed is Good
---Gordon Gecko

 

[racy]

It seems to me that traders exhibit extreme temperature swings between "greed" and "fear" whereas long-term investors have a low-grade greed fever.

 

[DrRoy]

It's only mildly greedy, and not tradable in any case. (Not that anything is really tradable.) No market timing!

 

[Lsbcal]

I am not sure how to use this. Tempted to say that it is only useful at extremes if one is trying to, say, readjust AA. But highs look like they were reached around November 2020 and the market returns have been very good since.

Maybe useful for long sustained extremes? Would help to see many more years on the chart.

 

[OldShooter]

Really, the gadget is clearly the product of someone trying to create today's click bait. The fact that its underlying indicators are equally weighted is prima facie evidence that no covariance analysis has been done. A serious effort would undoubtedly result in unequal weightings, but even that begs the question: What historical data could be used to validate the "measurement?" "too bulliish," "too bearish" -- How do you validate that, not to mention validating their claim that you can profit by "taking the other side?"

But, hey, the real objective is to attract eyeballs. That's apparently working for them.

 

[NW-Bound]

I looked at what they use to compute this "Greed/Fear Index", and found it reasonable.

How useful is this?

1) Is the current greed or fear justified?

This is the hardest thing to determined. For example, the index crashed to "extreme fear" when the news of the world-wide pandemic broke out. Of course, who was not scared at that point? Perhaps only by Covid deniers? How about the 9/11 event? The financial collapse caused by the subprime mania?

2) Will the current greed/fear index which simply reflects various current market conditions persist?

Back in mid last year, could anyone predict that there would be several vaccines available less than a year later? Could anyone exactly predict what the death rate and the economic damage would be? This index is telling the current status, not predicting what will happen ahead, and how soon it will happen.

3) Even if any index claims to predict the future, which this one does not, it will not be widely followed.

It's hard to overcome greed/fear. Who does not know that exercise is good for you? Why do we still have so many lethargic and overweight people? Same with investing.

I found this "Greed/Fear Index" interesting. How useful is this? I don't know yet. Again, this tells you about the current status, not about when something will reverse. Do I think the bitcoin and EV mania is ridiculous? Yes. But do I dare short them? No. But are these buyers greedy? You know my answer.

 

[Maenad]

I think it's just a rebranding of the VIX, but I could be wrong.

 

[Time2]

Has it been back tested?

 

[ncbill]

Historically you still do just fine even if you invested at past market peaks:

https://awealthofcommonsense.com/2014/02/worlds-worst-market-timer/

 

[Montecfo]

Historically you still do just fine even if you invested at past market peaks:

https://awealthofcommonsense.com/2014/02/worlds-worst-market-timer/

I was about to post the same. The market spends a lot of time trading near all-time highs. And the most likely occurrence after an all-time high is yet another all-time high.

As far as the indicator, not sure the value but it looks kind of interesting.

 

[Time2]

I tried to overlay the S&P 500 chart with the fear/greed index, but my skills failed me. I would like to see some indexes overlaid with the fear/greed index.

 

[GreenEggs]

This morning the meter is at 80. That's the highest that I've seen since following it. Maybe "something" is getting ready to happen?

 

[NW-Bound]

This morning the meter is at 80. That's the highest that I've seen since following it. Maybe "something" is getting ready to happen?

The 7 components of this index are conflicted.

Junk bond demand: Extreme greed
Market momentum: Extreme greed
Safe haven demand: Extreme greed
Market volatility: Neutral
Put and call options: Neutral
Stock price strength: Extreme fear
Stock price breadth: Extreme fear

Meanwhile, the futures are down this morning, prior to market open.

 

[teetee]

My solution to the fear is simple (and arguably elegant): if you think you have put money in at the record high, be prepared to keep investing into it every month/year for the next xx years (xx > 10).

But don't go put large amount of money into penny or obviously over valued stocks and hold me responsible for it when you got nothing in return after 10 years.

Consistent investing over impulse buy any day.

 

[Montecfo]

I do notice there are misusing some info, and some missing. Momentum for example is bullish not bearish.

And nothing about sentiment or commodities.

Also, if you do not invest at or near market highs you will be on the sidelines a lot.

Stay Fully Invested.

 

[NW-Bound]

I do notice there are misusing some info, and some missing. Momentum for example is bullish not bearish.

And nothing about sentiment or commodities.

Also, if you do not invest at or near market highs you will be on the sidelines a lot.

Stay Fully Invested.

Yes, momentum is bullish, which they say is greedy.

To be fair, they do not claim this is a buy/sell signal, but greed/fear. You have to decide to go with the flow, or to be a contrarian.