Source: CNN Money
CNN Money’s Fear & Greed Index is giving an extreme greed reading on the market, hitting a new multi-year high of 95 out of 100. It tracks seven different indicators: stock price momentum, 52-week highs and lows, breadth, put and call options, junk bond demand, market volatility, and safe haven demand. Currently, all six are registering extreme greed except for one—market volatility, measured by the CBOE Volatility Index or VIX.
What does this mean for the stock market? In the short-term, it suggests investors are fully invested with less cash on the sidelines to propel the market higher. It would not be surprising then to see gains moderate in the weks ahead or, in the worst-case scenario, for something to flip investors back towards fear. That said, the CNN Fear & Greed Index is not a crystal ball nor meant to be used as a timing tool, but it is interesting to keep an eye on nonetheless.