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Feeling Less Fearful? Or Just Complacent?
It’s been a while since I provided an update on CNN’s (mine) Fear & Greed Index. So, let’s do it!
The headline number of 38 is 11 points off the low of 27 set on 9/16. The stock market is up a bit in that time, too, but are we feeling less fearful? The stocks that drove those gains are the same ones we’ve all been focused on this year, the mega-cap techs. Specifically, $NVDA, $META, & $AAPL. Not all of the big names have been participating, though. In fact, NVDA, while it did rally off the 9/16 low, is still stuck, having set its yearly high in May.
Stocks:
Overall, breadth remains narrow, with net new 52-week lows dominating new highs by a big margin on the NYSE. Downside volume has swamped upside volume, too. As a result, even though the S&P 500 is near all-time highs, it’s gone sideways for the last 6 weeks.
Options
The options indicators have gone sideways and show no fear. They seem to reflect only the performance of the mega-caps and not the performance of the other 490ish stocks. $RSP is down about 6% since August, and small caps (RUT) are off 7%. Helene Meisler says that investors are getting complacent, and I don’t disagree.
Bonds
So, how are bonds doing? The Safe Haven Demand indicator includes treasuries, while the Junk Bond Demand indicator is corporate-focused, high-yield corporates ($HYG) vs. investment-grade ($LQD), so the treasury decline isn’t reflected there. What we see is that stocks are beating bonds. No surprise. Small surprise, however, is that Junk is beating Investment Grade. Not by much, and both are down, but Junk has the edge.
Final Thoughts
So, like Helene said, investors are complacent in the face of a market that is not holding up as well as the big-cap weighted indexes would have us believe.
Fear & Greed hasn’t been over 60 since last spring, and that’s my line in the sand. Until we can get above that level, stocks may rally, but it will likely be narrow and not be a healthy rally.
Bringing this back to the Diary, as Crazy1 said this morning, there could be some good tax loss harvesting opportunities this fall.
All charts are from CNN Business: https://www.cnn.com/markets/fear-and-greed
This commentary was originally posted in the Daily Diary on TheStreet Pro.
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