The Fear and Greed Index

[10/12/14] After a series of large point drops in the DJIA, S&P 500 and Nasdaq indices, CNN reported this week that their 'Fear & Greed Index' was registering its highest anxiety reading in a very long time. One month ago, with the indices near all-time peaks, investor sentiment was dead neutral. One year earlier, the mood was quite downbeat ahead of what turned out to be a decent 12-month advance.

Casual observers might not realize that those negative vibes typically accompany great buying opportunities. Don’t take my word for that. Judge for yourself.

I’ve reproduced CNN’s Fear & Greed chart going back three full years, to the fall of 2011. Then I added the same time period for the S&P 500 ETF (SPY). Not one of the eleven most high-anxiety periods should have been sold.

100% of those nerve-wrecking moments reversed within weeks, leaving many investors stopped out of great positions simply due to temporarily lower share prices.

-- Dr. Paul Price, 10/3/14

Note: Price wrote this on 10/2/14, when the Dow closed at 16,801.05.  It is now at 16,544.10 (even cheaper).  The Fear & Greed Index is currently at 1 (on a scale of 1 to 100).

[10/15/14] Fear and Greed index hits zero today.