November 5, 2019

The market sentiment has changed

Doug Kass via twitter explains an indicator that shows the current investment sentiment.

The CNN Fear/Greed at 86 and 'extreme greed' read and the highest level since late 2017 during the euphoria over the tax reform bill. The index, which ranges between 0-100 was 8 one year ago and 67 just one week ago. The market rallied right into mid January 2018 so don't use this as a timing tool but do realize how much the mood has changed. What separates this index from II and AAII is that it measures what people are actually doing rather than just the emotions of II and AAII.

It encapsulates the put/call ratio, the difference in the 20 day return between stocks and bonds, how extended the S&P 500 is above its 125 day moving average, the McClellan volume summation index, new 52 week highs vs 52 lows, the yield spread between high yield and IG bonds, and lastly the VIX. We'll get the II figure tomorrow and expect a further stretch between Bulls and Bears to around  40.