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Falling Fear/Greed

Troy Bombardia
2020-09-10
The stock market's recent pullback caused certain sentiment indicators to drop back from extreme levels. For example, the CNN Fear/Greed indicator is almost at 50 after staying elevated for an extremely long time

The stock market's recent pullback caused certain sentiment indicators to drop back from extreme levels. For example, the CNN Fear/Greed indicator is almost at 50 after staying elevated for an extremely long time:

From 1998 to present, there was only 1 other period in which our CNN Fear/Greed proxy was this elevated, for this long: 2009.

Historically, weakening sentiment after extreme strength could cause the pullback to continue, but longer term this led to more gains over the next 6 months:

Meanwhile, the USD Index has rallied slightly as the stock market pulls back. USD Optix's 50 dma is at 26, the lowest level in almost a decade:

This marked the USD bottom only once, in 2011. Before that, such low sentiment did not portend a USD bounce. But given that the S&P and USD are inversely correlated right now, an S&P pullback will lead to a further USD bounce:

Oil recently formed a golden cross (50 dma > 200 dma) after its worst plunge in history:

This was not consistently bullish nor bearish for oil going forward:

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