Stock market greed/fear indicators

Discussion in 'Trading' started by ea0680, Mar 5, 2014.

  1. ea0680


    I am always looking at this forum for the general market mood (as contra indicator). I also look to the CNN fear / greed index (currently at 78 greed level as of 3/5/2014) . Also, as a comparison to recent years, the VIX used to be stubbernly high (relatively) when the S&P made new highs - But not recently , new market highs and the VIX is quick (relative to the past) to run near lows.

    I just dont see the amount of fear that I used to see on Elitetrader or just in general . As a long term lurker to this site , there is such a huge reduction in the amount of Black Friday/ Black Monday call predictions as the S&P 500 continues to make new highs. Back about 3+ years ago, every new high was met with huge amount of crash/market top new forum threads/posts. But can clearly see in hindsight how wrong all those market top callers were.

    Now today the majority of forum posts I seem to see are those confidently long stocks, "long and strong" is the most common quotes I see. I also remember seeing CNBC show recently as they were interviewing regular joe investors during the Jan 2014 small selloff and they were all so confident of how they will hold and add to their stocks. I Just cant help to think complacency has really set in to general market participants.

    I am not at all calling tops, as I know markets can stay like this for longer than you think.
    I am just trying to be aware of my surroundings and seeing how the "public" which hated stocks a few years ago , are now so confident in getting in. Keep in mind, the same fed low /zero rates and QE's were in place back years ago too. So really the only difference is the public seems to see the 30% returns last year and rushing in to not miss more gains this year - as if its a certain to only go up.

    I would like to know what indicators others are finding useful to gauge fear/greed in the markets on both a longer term (swing) and short term (day trading).
  2. When cnbc stops having marc faber and other doomsayers on; when the mom and pop type are in the stock market speculating; when the most bearish bears become bulls; around that time it's appropriate to lessen your risky positions.
  3. ElCubano


    or you can always wait til Nitro pukes out his paper trade and/or reverses...:D
  4. ea0680


    CNN Fear & Greed index is now Extreme Greed 80 territory as of 2:52pm 3/6/2014. Its been higher in the past, but there is a chart that plots its index history and its pushing up to the top of the range.

    I am also watching the New highs - New lows index (thanks to Dr. A Elder) .

    As far as the famous doomsayers "analysts" that used to be all over CNBC and others almost everynight back in 2008-2011. I barely see them anymore (remember peter schiff ?). That in itself was a good barometer for the 2009 bottom and the rising market on wall of worry all the way thru Oct 2013. From Oct 2013 forward, I just dont see the wall of worry that was there for so long.

    Would like to know what others use as barometers/ early warning indicators - again not that we are at a top or trying to pick a top, but would like to see the unique insights of others on this topic.
  5. dbphoenix


    Actually, Mamis came up with NH/NL long before Elder. You may also want to look at vol of advancers v vol of decliners.
  6. fear means bubble.
    greed means herd.

    I always play the fear card, more than the herd card. I like to short a rally, not sell short a drop. I like to buy dip, bottom picking, no hype for chasing extended rally.

    buy low and sell high serves me very well. when it is low, I feel greedy and Iforget about my fear ofcontinuing drop, I buy. when it rallies, I feel the sky always falls after a period of excitment, so I sell/short, everything to me is just a pozi scheme, always the scheme will end.

    Iam waiting the unemployment shoot and short, it seems very precise. I like short in the strength, feel fun.

    I am afraid of riding roller caster. the fastest period is the start orthe bottom part, when on the top, feels very safe it is slow gentle kind, the illusion is secure and stable.

    I like warren buffet's wisdom. when at the start,you should close your eye, when youare on the top, open your eyes wide.

    trading every day is fun! happy weekend!

    Spring is here
  7. failed_trad3r is a great indicator, so was grand supercycle before he got banned.
  8. ea0680


    I just remembered something and kind of brings home the point of why I am trying to be aware of when the general market participant enthusiasm is getting high and fear of the market ever going down and staying down- seems almost like its a crazy thought.

    As an example do you remember a few years ago on youtube- there was this young trader recording his long trade in emini russell or YM or something like that. I think the video made the rounds here at ET. He lost big and was completely losing it on video as he realizes its sunday night , market is gapping down and has to figure out if he will sell for huge loss, or wait till morning.

    Here is what I took away from his experience, he obviously thought/felt he could buy a dip , as" it cant go down" , and if it did, its only a temporary shake out and hold till big move up comes (it always does), and get out with profit. He briefly mentions during his rant that he only thought it could go down alittle, but nothing too bad.

    I think this kind of "it can only go up" mentality happens when we ("we" as in market participants/traders/investors etc) get almost brainwashed by the market cycles we see and experience. Especially the most recent experiences.

    This "cycle" (cycle of down moves resulting in new highs) seems to breed confidence as we become exposed over and over to this pattern. Now when this cycle happens faster and faster, with fewer days from market selloff/correction to new highs, we almost forget any other outcome is possible as our short term memories are now trained otherwise.

    I am not sure if we are at that point in the market now as we just seen May 2013 selloff, then new highs in Oct , Nov , Dec 2013. Now we have Jan 2014 selloff, then Feb, March 2014 new highs . The cycles are happening faster, and I almost have to reach back to my memory of when a selloff did not always come back ( so fast).

    I now can say that I dont fear a selloff that will not at some point come back and go up to greater highs . In fact my memories of 2001-2002, 2008-2009 are so far back that I wonder why I should I even try to remember such times as they surely will not happen again .

    My point is I am trying to see how the market has been conditioning me to think based on its recent past. I can say that its been conditioning me to think it can only go up and to buy any dip or at least hold thru any dips and not sell out at highs. So the very fact that I am now thinking this means something (warning) . I know I would not think this way back in 2010, or 2011, or 2012. At those times, I was conditioned that each new swing high did not hold and any selloff was feared as a new potential downleg.

    So if I am thinking this way now based on recent market action , perhaps others are "acting" on this same conditioning, most likely without knowing why they somehow feel the need to get in and not miss out and could help explain the markets recent complacency and lack of fear in general.

    Please feel free to add your own thoughts and observations as well.
  9. toolazy


    #10     Mar 8, 2014