InsideArbitrage April 2024 Mid-Month Update – Back In Fear Territory

Investor sentiment is often as fickle as fad diets, turning on a whim. We observed that happen when our preferred sentiment indicator, the CNN Fear & Greed Index, swung from extreme greed in early March into fear territory yesterday. The last time I discussed this indicator in more detail was our December 2023 Mid-Month Update where I wrote the following: The market has started anticipating as many as six rate cuts next year and investors might be getting a little too giddy in their optimism. Instead of focusing on a specific idea in this mid-month update, I wanted to delve a little deeper into a sentiment indicator we have used a lot the last couple of years and what it is telling us now. Some investors like to use the volatility index VIX or the AAII Investor Sentiment Survey as their proxy for market sentiment and to determine if animal spirits are in greed or fear territory. My preferred index is the Fear and Greed Index. Looking at the index over the last few days, I was surprised we had not yet tipped over into extreme greed territory. Examining the seven components that comprise this index, it became clear why we...

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