CNN's Fear & Greed Index Shows Signs of Extreme Fear in Stock Market
Understanding the Fear & Greed Index
The CNN Business Fear & Greed Index is a tool used to gauge stock market movements and assess whether stocks are fairly priced. It employs seven market indicators to capture the level of investor sentiment, ranging from extreme fear to extreme greed. These indicators include stock price volatility, the put-call ratio, junk bond demand, stock market momentum, safe haven demand, equity fund flows, and market breadth.
Current Market Sentiment
According to the latest update, the CNN Business Fear & Greed Index is showing signs of "Extreme Fear", indicating that investors are extremely pessimistic about the stock market. This suggests that stocks may be undervalued due to excessive selling pressure.
Analyzing the Seven Indicators
Out of the seven indicators used in the Fear & Greed Index, four are currently in "Extreme Greed" territory. These include stock market momentum, demand for risky junk bonds, put-call ratio, and safe haven demand. This suggests that investors are taking on more risk and chasing after higher returns, despite the overall fearful sentiment.
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