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Post by anitya on Jan 21, 2022 21:50:22 GMT
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Post by oldskeet on Jan 21, 2022 21:59:39 GMT
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Post by roi2020 on Jan 22, 2022 4:51:39 GMT
How many people on this forum believe that the Fed will increase the discount rate while the stock market is plunging??? I believe the federal funds rate and the discount rate will both be increased. Jerome Powell recently acknowledged that inflation was not transitory. In the 12 months ending in December, CPI-U (Fed prefers to use PCE) surged 7.0% which was near a 40-year high. The unemployment rate is low. The fed funds rate and the discount rate hover near historic lows. If not now, when?
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Post by Fearchar on Jan 27, 2022 17:57:48 GMT
The Market is now operating in the "Fear" range. Current Reading is 34.
Put/Call Options 86.35%: Extreme Greed Junk Bond Demand 1.58%: Extreme Greed Stock Price Breadth 16.36%: Fear Market Volatility 3.77: Extreme Fear Stock Price Strength -5%: Extreme Fear Market Momentum -4.13: Extreme Fear Safe Haven Demand -6.58%: Extreme Fear
Notice, the market is not entirely Fearful. There are still two very significant pockets of Extreme Greed.
My own impression is that unless an unforeseen event occurs, Extreme Fear will not occur and widespread Greed will gradually crept back into the market. Of course, the FED will be wielding a very large hammer and sword to maintain order.
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Post by richardsok on Jan 27, 2022 18:46:58 GMT
Appears violent overnight and big intra-day swings are becoming common. As posted before, am hoping to deploy very large cash position either into a broad-based LoVol ETF (like USMV or SPHD), or something more growth oriented like ARKF or GTEC -- all still trending bearish. The new volatility is making such a timely big buy tricky. I have tweaked my longer-term settings to throw off two-day, rather than one-day signals. Hope to avoid being lured in by another massive market head-fake.
Of course, will now have to trade protective hedges on the same metric.
Am up almost 1% YTD in this miserable market. Don't want to give it back.
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Post by FD1000 on Jan 27, 2022 21:43:39 GMT
The Market is now operating in the "Fear" range. Current Reading is 34. Put/Call Options 86.35%: Extreme Greed Junk Bond Demand 1.58%: Extreme Greed Stock Price Breadth 16.36%: Fear Market Volatility 3.77: Extreme Fear Stock Price Strength -5%: Extreme Fear Market Momentum -4.13: Extreme Fear Safe Haven Demand -6.58%: Extreme Fear Notice, the market is not entirely Fearful. There are still two very significant pockets of Extreme Greed. My own impression is that unless an unforeseen event occurs, Extreme Fear will not occur and widespread Greed will gradually crept back into the market. Of course, the FED will be wielding a very large hammer and sword to maintain order. As I said already before, the Fear & Greed Index is far from being accurate. In 2021, it signaled 3 times extreme fear, which is close to 20. The SP500 had one of the best years for performance at 28.7% + SD=11.15 which is an excellent risk-adjusted performance(link) that I have ever seen for the SP500 in one year. Please look at SD, Max Draw, Sharpe, Sortino.Attachments:
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Post by Norbert on Jan 27, 2022 22:25:20 GMT
Appears violent overnight and big intra-day swings are becoming common. As posted before, am hoping to deploy very large cash position either into a broad-based LoVol ETF (like USMV or SPHD), or something more growth oriented like ARKF or GTEC -- all still trending bearish. The new volatility is making such a timely big buy tricky. I have tweaked my longer-term settings to throw off two-day, rather than one-day signals. Hope to avoid being lured in by another massive market head-fake. Of course, will now have to trade protective hedges on the same metric. Am up almost 1% YTD in this miserable market. Don't want to give it back. I note that SCHD is demonstrating less downside volatility than USMV so far this year. FWIW. Solid divvie payers might be a reasonable equity overweight. My guess is that the year will be challenging, for all the reasons being discussed here. Am in no rush to increase risk exposure.
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Post by FD1000 on Jan 28, 2022 23:54:39 GMT
SCHD doesn't concentrate on lower volatility, while USMV does. SCHD mainly Tracks an index focused on the quality and sustainability of dividends Invests in stocks selected for fundamental strength relative to their peers, based on financial ratios. This fund had worked well within different market condition by using a mixture of high performance, higher yield, lower SD, value, growth. I think it also uses some momentum. Add to it a very cheap ER=0.06 and why I like it for years. ( link) Summary *SCHD outperforms its peers on a yield, return, and risk basis. *A 2.83% net current yield with a 10-year average total return of 15.39% makes this ETF extremely attractive to investors of all ages. *SCHD should be a staple in every IRA account to enjoy the rewards of long-term compounding growth and steady passive income.
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Post by Chahta on Jan 29, 2022 0:04:40 GMT
My largest holding along with SCHX in equal amounts since 2017.
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Post by Fearchar on Feb 14, 2022 22:30:00 GMT
Market current overall reading: 32 "Fear"
Put/Call Options: 87.34% Extreme Greed Market Volatility: 28.33 Neutral Stock Price Strength: 5.69% Fear Junk Bond Demand: 1.78% Fear Safe Haven: -4.35% Extreme Fear Market Momentum: -3.33% Extreme Fear McClellan volume Summation Stock Price Breadth: -7% Extreme Fear
Friday Feb 11,2022 S&P500 4418.64 Forward Earnings Estimate 227.4 0.30% rise in earnings over past week. 1.20% rise in earnings over past 4 weeks. Current S&P 500 Forward Earnings yield: 5.1%
Baa Bonds 3.94% 5 Year TIPs: -0.98% ICE BofAML HY Spread: 3.44%
90 Day Treasuries: 0.36% 10 Year Treasuries: 1.92%
Yield on Baa bonds have risen significantly and are now trading at levels similar to November 2019. That is prior to the start of Covid. So, million dollar question is this sufficient? Fed Reserve is expected to begin raising rates and may even purchase some securities. But again, how many times will rates rise and how many securities will they buy. At current Baa yields, my equity calculator is not showing a great deal is to be had assuming 5% growth in earnings.
Interestingly, CNN's metric for junk bond yield spreads has shifted to Fear. This is remarkable as the ICE BofAML HY spread has barely budged indicative of complicity if not outright greed is more prevalent from my perspective.
Also, notice 5 year TIPs, while elevated, are significantly below the 0 to 0.5% range common in most of 2019. So, there is likely a ways to go.
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Post by Fearchar on Mar 1, 2022 17:26:30 GMT
Market current overall reading: 18 "Extreme Fear"
Junk Bond Demand: 1.78% Fear Put/Call Options: 52.06% Fear Stock Price Strength: -5% Extreme Fear McClellan volume Summation Stock Price Breadth: -9.91% Extreme Fear Safe Haven: -4.18% Extreme Fear Market Volatility: 33.83 Extreme Fear Market Momentum: -5.26% Extreme Fear
Friday Feb 25,2022 S&P500 4385 Forward Earnings Estimate 228.6 0.14% rise in forward earnings estimate over past week. 1.6% rise in forward earnings estimate over past 4 weeks. Current S&P 500 Forward Earnings yield: 5.2%
90 Day Treasuries: 0.32% 10 Year Treasuries: 1.97%
Baa Bonds 4.20% 30 year Fixed 4.06% 5 Year TIPs: -1.21% ICE BofAML HY Spread: 3.93%
We have not hit the Extreme Fear level for a while. Normally, that is about as low as it gets accoriding to CNN's metric. My own favorite, the ICE BofAML HY Spread still has a ways to go. 7% is nominally where good prices are to be found.
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Post by FD1000 on Mar 1, 2022 21:42:12 GMT
Market current overall reading: 18 "Extreme Fear" Junk Bond Demand: 1.78% Fear Put/Call Options: 52.06% Fear Stock Price Strength: -5% Extreme Fear McClellan volume Summation Stock Price Breadth: -9.91% Extreme Fear Safe Haven: -4.18% Extreme Fear Market Volatility: 33.83 Extreme Fear Market Momentum: -5.26% Extreme Fear Friday Feb 25,2022 S&P500 4385 Forward Earnings Estimate 228.6 0.14% rise in forward earnings estimate over past week. 1.6% rise in forward earnings estimate over past 4 weeks. Current S&P 500 Forward Earnings yield: 5.2% 90 Day Treasuries: 0.32% 10 Year Treasuries: 1.97% Baa Bonds 4.20% 30 year Fixed 4.06% 5 Year TIPs: -1.21% ICE BofAML HY Spread: 3.93% We have not hit the Extreme Fear level for a while. Normally, that is about as low as it gets accoriding to CNN's metric. My own favorite, the ICE BofAML HY Spread still has a ways to go.7% is nominally where good prices are to be found. What is the significance of this spread in relation to trading and/or future market pricing
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Post by Fearchar on Mar 7, 2022 13:38:17 GMT
Current Market overall reading: 16 "Extreme Fear"
Junk Bond Demand: 1.79% Fear Stock Price Strength: -5% Extreme Fear Market Volatility: 31.98 Extreme Fear McClellan volume Summation Stock Price Breadth: -6.35% Extreme Fear Put/Call Options: 44.36% Extreme Fear Safe Haven: -5.02% Extreme Fear Market Momentum: -4.64% Extreme Fear
Friday March 7,2022 S&P500 4329 Forward Earnings Estimate 230.1 Current S&P 500 Forward Earnings yield: 5.3% 0.67% rise in forward earnings estimate over past week 1.8% rise in forward earnings estimate over past 4 weeks
5 Year TIPs: -1.43% 30 Year TIPs: -0.11% 90 Day Treasuries: 0.34% 5 Year Treasuries: 1.63% 10 Year Treasuries: 1.74% 30 year Fixed 4.15% Baa Bonds 4.10%
ICE BofA US High Yield Index Option-Adjusted Spread (BAMLH0A0HYM2): 3.71% lowering
Extreme Fear continues with the exception of Junk Bond Demand. CNN is calling it a fear level, but with ICE well below my 7% threshold, I'm neutral.
The Ukraine war is sickening and driving the markets into a frenzy. The FED is still expected to rise rates, but maybe not so much with the threat of oil prices spiking. Notice how Baa bonds have eased while 30 year mortgages rose. Mortgages though are still crazy cheap compared to 2019. Light vehicles sales have decreased slightly; not a good sign.
In hindsight, Cash has been King and commodities God.
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Post by uncleharley on Mar 7, 2022 13:51:30 GMT
Yes, Gold cracked thru $2000 in overnight trading and Silver broke thru $26. Both have backed off those highs before the U S open, but my expectation is that they will soon be back there. Other commodities are rising rapidly also. Texas crude oil is at abt $117 per brl. All are very volatile.
EDIT: Rumors of a cease fire or partial cease fire in Ukraine are driving opening prices of the above down.
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Post by Fearchar on Mar 13, 2022 16:04:38 GMT
Current Market overall reading: 14 "Extreme Fear"
Junk Bond Demand: 1.80% Extreme Fear Stock Price Strength: -5% Extreme Fear Market Volatility: 30.75 Extreme Fear McClellan volume Summation Stock Price Breadth: -7.80% Extreme Fear Put/Call Options: 38.09% Extreme Fear Safe Haven: -7.11% Extreme Fear Market Momentum: -7.16% Extreme Fear
Friday March 11,2022 S&P500 4204.31 Forward Earnings Estimate 230.1 Current S&P 500 Forward Earnings yield: 5.3% 0.67% rise in forward earnings estimate over past week 1.8% rise in forward earnings estimate over past 4 weeks
5-Year Breakeven Inflation Rate (T5YIE): 3.52% 30 year Fixed Mortgage (WSJ): 4.36% 30 year Fixed Mortgage (MORTGAGE30US): 3.85% YChart Seasoned Baa Corporate Bonds: 4.36% ICE BofA US High Yield Index Option-Adjusted Spread (BAMLH0A0HYM2): 4.00%
This is a second week of Extreme Fear as measured by CNN. With a horrific war in eastern Europe, domestic inflation running rampant and Thursdays decision by the European Central Bank to begin tightening, the markets have continued to recoil.
However, the ICE BofA US High Yield index is still well below my 7% threshold.
Notice during our previous tight monetary condition in Nov/Dec 2018 Baa bonds were 5.22/5.13% 30 year Mortgages were 4.9/4.7% S&P 500 forward earning rates were 6.3/7.2% and the 5-Year Breakeven Inflation Rates were 1.8/1.6% With the current 5-Year Breakeven Inflation Rate nearly 2% higher; Mortgages, Baa bonds and very likely the S&P 500 forward earning rates will likely need to adjust similarly to maintain a well arbitraged market.
Just saying!
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Post by Fearchar on Mar 21, 2022 13:22:04 GMT
Market gains this past week have elevated the overall Fear & Greed reading to: 37 "Fear"
The "Good" news from what I can tell is that the FED only raised their benchmark 0.25% and oil prices moderated. However, a horrific war continues and domestic inflation continues to run rampant. The FED does have a job to do, but has allowed the war in Eastern Europe to pause those duties.
The market has responded positively, but from my perspective it's really not good news. By delaying necessary actions, the FED is increasing the possibility that they will need to take overly aggressive actions to control inflation.
The 5 year TIP implied rate of inflation has been rising sharply since February. It's now at 3.48%, which is well above the previous FED target of 2%. It is at the highest implied inflation rate since FRED started keeping track (2003). Headline inflation has been even higher.
With QE now on hold and without FED purchases, the market can finally begin to appropriately price long term rates. With inflation as high as it is though, it would only stand to reason that the market will demand a positive real rate of return. That could mean, we may see higher mortgage and Baa rates than the recent past since inflation is so much higher.
In the last decade, the highest 30-year Fix Rate Mortgage average was 4.94% on November 8, 2018. Implied inflation at that time was only slightly over the 2% FED target. So, the real 30 year mortgage rate was 4.94% - 2% = ~3%. This math implies a 30 year mortgage rate of 3.48% + 3% = 6.48%; a death blow! As much as I hope that doesn't happen, I can not ignore the implications of our current rate of inflation.
Market Indicators:
Friday March 18,2022 S&P500 4463 +6.2% for the week; -6.4% YTD Forward Earnings Estimate 231.7 Current S&P 500 Forward Earnings yield: 5.2% 0.48% rise in forward earnings estimate over past week 1.9% rise in forward earnings estimate over past 5 weeks
5-Year Breakeven Inflation Rate (T5YIE): 3.48% 30 year Fixed Mortgage (MORTGAGE30US): 4.16% ICE BofA US High Yield Index Option-Adjusted Spread (BAMLH0A0HYM2): 3.81%
Safe Haven: Extreme Greed Market Volatility: Neutral Junk Bond Demand: Fear Put/Call Options: McClellan volume Summation Stock Price Breadth: Extreme Fear Stock Price Strength: Extreme Fear Market Momentum: Extreme Fear
Historically, a BAMLH0A0HYM2 reading >7% has been my threshold for Buying. However, I've noticed that during the Nov/Dec 2018 tightening period, BAMLH0A0HYM2 was only slightly over 5%. After a few weeks, BAMLH0A0HYM2 retreated. The most recent period when BAMLH0A0HYM2 exceeded 7% was during the Covid panic between March thru May 2020.
Obviously, 5% will be reached sooner and more frequently than 7%. In addition, the next correction in the market is more likely to be induced thru actions of the FED than another Pandemic or something similar (at least I hope so).
Patience will be paramount, and in the meantime I will noodle what actions may be warranted at the 5% level. No immediate indication at this time as to when either level could be reached. I really don't expect serious problems to develop until at least 6 months from now. There are too many Doves on the FED.
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Post by FD1000 on Mar 21, 2022 13:51:53 GMT
"Historically, a BAMLH0A0HYM2 reading >7% has been my threshold for Buying."
I'm reading the above and all the other numbers and trying to understand what is actionable? What are you actually do based on that?
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Post by Fearchar on Mar 21, 2022 14:21:06 GMT
FD;
It's a Strong Buy signal for the market; an index fund would be fine. It only occurs when the economy is under significant stress and prices for risk securities are depressed.
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Post by Fearchar on Mar 28, 2022 13:07:03 GMT
Market gains this past week have continued to elevate the overall Fear & Greed reading to: 47 "Neutral"
Safe Haven: Extreme Greed Market Volatility: Neutral Junk Bond Demand: Fear Put/Call Options: Neutral Stock Price Breadth: Fear Stock Price Strength: Fear Market Momentum: Extreme Fear
Friday March 25,2022 S&P500 4543 +1.8% for the week; +4.5% last 5 weeks, -4.7% YTD Forward Earnings Estimate 232.1 Current S&P 500 Forward Earnings yield: 5.1% 0.18% rise in forward earnings estimate over past week 1.7% rise in forward earnings estimate over past 5 weeks
5-Year TIPs indexed (DFII5): -1.20% 5-Year Forward Inflation Expectation (T5YIFR): 2.31% 5-Year Breakeven Inflation Rate (T5YIE): 3.59% BBB Effective Yield (BAMLC0A4CBBBEY) 4.00% 30 year Fixed Mortgage (MORTGAGE30US): 4.42% ICE BofA US High Yield Index Option-Adjusted Spread (BAMLH0A0HYM2): 3.67%
While Mortgages rates continued to scream higher, BAMLH0A0HYM2, my favorite metric, actually relaxed this week!
A BAMLH0A0HYM2 reading >7% is my threshold for a market wide "STRONG BUY". However, during the Nov/Dec 2018 tightening period, BAMLH0A0HYM2 was only slightly over 5%. Obviously, 5% will be reached sooner and more frequently than 7%. A BAMLH0A0HYM2 reading >5% should be considered as a limited and selective market "BUY".
Year ahead market forecast: -4% (between -2% to -12% depending on interest rates)
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Post by oldskeet on Mar 28, 2022 17:23:52 GMT
Hi Fearchar , On your market buy signal metric and its forecast. A BAMLH0A0HYM2 reading >7% is my threshold for a market wide "STRONG BUY". However, during the Nov/Dec 2018 tightening period, BAMLH0A0HYM2 was only slightly over 5%. Obviously, 5% will be reached sooner and more frequently than 7%. A BAMLH0A0HYM2 reading >5% should be considered as a limited and selective market "BUY". Year ahead market forecast: -4% (between -2% to -12% depending on interest rates) Can you tell me more about this? Is your forecast derived from a static type mechanism or based upon an opinion drawn from metrics? I find it indeed interesting. And, now you have me wondering! Old_Skeet You can message me if you wish.
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Post by Fearchar on Mar 28, 2022 18:35:56 GMT
oldskeet, The market forecast that I shared is based on current market conditions. Basically, the most recent published S&P 500 forward earnings estimates, current interest rates and typical spreads. So, it's not static. However, it's also a range because I don't know where rates will be a year from now. So, yes it does contain some opinion, or at least a range of possible future interest rates. The model says -4%. But, my opinion is -2% to -12%.
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Post by oldskeet on Mar 28, 2022 19:04:52 GMT
Thanks.
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Post by FD1000 on Mar 28, 2022 22:48:56 GMT
Let's analyze buy when BAMLH0A0HYM2>7. Look at the chart below. Each number in the chart correlate to what is below. 1) 10/2000 thru 03/2003: The SP500 had a terrible performance in these years 2) 02/2008: it started at 7 and kept going up while stocks had a terrible performance of losing 50% from the top. 3) 08/2011: 2 months later, the SP500 lost 20% 4) 01//04/2016: the indicator passed 7. That was just 1% from the top. The SP500 lost more than 10% after that and rebounded. Another bad timing 5) 2020-03-12: the indicator passed 7. From that point, the SP500 lost another 16% IMO, this indicator DOES NOT have a good timing. Attachments:
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Post by Fearchar on Mar 29, 2022 14:06:40 GMT
Thanks; Good feedback...
Will treat it as a logic gate rather than as an initiation signal.
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Post by Fearchar on Apr 4, 2022 11:07:34 GMT
47 "Neutral" Same as last week.
Safe Haven: Extreme Greed
Market Volatility: Neutral Stock Price Breadth: Neutral
Junk Bond Demand: Fear Put/Call Options: Fear Stock Price Strength: Fear
Market Momentum: Extreme Fear
Friday April 1,2022 S&P500 4546 +0.1% for the week +3.7% last 5 weeks -4.6% YTD
Last Weeks Forward Earnings Estimate 232.9 Last Week S&P 500 Forward Earnings yield: 5.1% 0.32% rise in forward earnings estimate over past week 1.7% rise in forward earnings estimate over past 5 weeks
ICE BofA US High Yield Index Option-Adjusted Spread (BAMLH0A0HYM2): 3.43% 5-Year Treasury: 2.42% 5-Year TIPs indexed (DFII5): -0.92% 5-Year Forward Inflation Expectation (T5YIFR): 2.29% 5-Year Breakeven Inflation Rate (T5YIE): 3.29% BBB Effective Yield (BAMLC0A4CBBBEY) 3.89% 30 year Fixed Mortgage (MORTGAGE30US): 4.42%
Last week, the unemployment rate fell to 3.6% with Hourly earnings: +5.6% y/y; +0.4% m/m
Also, another week with Mortgages rates screaming higher... uggh Just how high can they go??? Notice that the yield on BBB bonds though has relaxed slightly. So, perhaps rates will stabilize in the near term at current levels.
Meanwhile, BAMLH0A0HYM2, my favorite metric has also continued to relaxed as well. On Tuesday March 15th, BAMLH0A0HYM2 hit a high of 4.21. On Wednesday March 31, BAMLH0A0HYM2 bottomed at 3.33. Current reading is only slightly elevated from 3.33% and more likely to continue trending lower.
The S&P hit 4175; double lows on March 8th and 14th. Expected future returns with current rates are minimal with a downside to between 4,150 to 4,300 entirely possible.
It seems reasonable to assume that barring any unforseen disruptions, the markets will continue to trade in current range with BAMLH0A0HYM2 below 3.75. Of course, unforeseen are by definition unforeseen.
Notice too that both expected and inferred 5 year inflation rates have relaxed. This is a welcomed sign and a trend that should continue. 5 year TIPs are expected to eventually return to a range between 0 to 0.5%.
A BAMLH0A0HYM2 reading >5% remains my threshold for initiation of serious BUY logic. Not an immediate BUY signal, but rather time to begin closer evaluation.
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Post by Fearchar on Apr 9, 2022 13:51:21 GMT
46 "Neutral" Nearly the same as last week.
Safe Haven: Extreme Greed
Stock Price Strength: Greed Stock Price Breadth: Greed
Market Volatility: Neutral
Put/Call Options: Fear
Junk Bond Demand: Extreme Fear Market Momentum: Extreme Fear
Friday April 8,2022 S&P500 4488 -1.3% for the week +3.7% last 5 weeks -5.8% YTD
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Post by oldskeet on Apr 9, 2022 14:31:37 GMT
The Index may score 46 (Neutral) ... But, Old_Skeet is fearful, perhaps around a 25 on a scale of 100.
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Post by Fearchar on Apr 9, 2022 15:51:02 GMT
The Index may score 46 (Neutral) ... But, Old_Skeet is fearful, perhaps around a 25 on a scale of 100. I agree. The Fear & Greed index is such a hodge podge. Individual indicators cover the whole spectrum from Extreme Greed to Extreme Fear. Average it all together and it's neutral. But what's an individual to do? Current market conditions are rather rare in that we know that monetary policy needs to be adjusted. The needed adjustments are negative for bonds and stocks. Yields and earning ratios must go up. Taken to an extreme, they could be negative for the economy too. Speculative as to how much more will be done and if the FED could act too harshly.
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Post by Chahta on Apr 10, 2022 12:42:46 GMT
There are those expecting 2 1/2 to 3% Fed rate by the end of the year.
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Post by FD1000 on Apr 10, 2022 12:51:12 GMT
The Index may score 46 (Neutral) ... But, Old_Skeet is fearful, perhaps around a 25 on a scale of 100. I agree. The Fear & Greed index is such a hodge podge. Individual indicators cover the whole spectrum from Extreme Greed to Extreme Fear. Average it all together and it's neutral. But what's an individual to do?Read my new thread.
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