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Thursday, July 31, 2014

Fear & Greed Index at 12 Shows Extreme Fear

The CNNMoney "Fear & Greed Index" is currently showing "extreme Fear" with a reading of 12 on a scale of zero to one hundred. Here is a snapshot of the index for today.

Fear & Greed Index for July 31, 2014

This index is a summation of seven indicators explained in detail here
  1. Stock Price Momentum: The S&P 500 versus its 125-day moving average
  2. Stock Price Strength: The number of stocks hitting 52-week highs and lows on the New York Stock Exchange
  3. Stock Price Breadth: The volume of shares trading in stocks on the rise versus those declining.
  4. Put and Call Options: The put/call ratio, which compares the trading volume of bullish call options relative to the trading volume of bearish put options
  5. Junk Bond Demand: The spread between yields on investment grade bonds and junk bonds
  6. Market Volatility: The VIX, which measures volatility
  7. Safe Haven Demand: The difference in returns for stocks versus Treasuries
Fear & Greed Index Components for July 31, 2014

"For each indicator, we look at how far they've veered from their average relative to how far they normally veer. We look at each on a scale from 0 - 100. The higher the reading, the greedier investors are being, and 50 is neutral. Then we put all the indicators together - equally weighted - for a final index reading."

Fear & Greed Index plot vs Time

Must Read: Timer Digest Market Timer of the Year Awards

August 1 Update:  Today the Fear and Greed Index hit 5 for a low not seen since 2011!

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