Several years ago I was attending a Technical Analysis investment seminar in New York. This seminar is held annually and put on by the CMT Association. The CMT Association is an organization involved with Technical Analysis of financial markets. This annual conference is attended by Financial Advisors as well as investors interested in the Technical Analysis of financial markets. I was introduced to the Fear and Greed Index by one of the speakers, Katie Stockton, at this particular conference.
This index measures investor sentiment and can indicate when investors are too Bullish or Bearish. I like to use this index as a “quick look” contrarian indicator. So, when the indicator is pointing to extreme greed in the market it could mean that stocks are due for a correction. Of course the same is true on the other side of the indicator. The index shows values between 1 and 100. 100 is the most extreme side of greed. Currently, the seven, equally-weighted, components of the index are mixed and the index is showing a reading of 39, indicating fear in the market. The link to the index is found at https://money.cnn.com/data/fear-and-greed/
As I mentioned, this index can be used as a contrarian indicator. When the indicator is showing an extreme reading in either direction, it may be beneficial to make an investment move in the opposite direction. At Augusta Capital, we have a long-term investment horizon. I use this indicator as one tool in timing a market buy or sell.
