MARKET ANALYTICS TEAM, MARCH 24, 2017
Invest Up Sentiment Indicator for World Stocks - GREED
The Invest Up Sentiment Indicator for World Stocks increased in March. The indicator now stands at 78.09, up from 76.04 in February.
Rated GREED, the current value of 78.09 indicates excessive optimism in the global stock market.
The indicator is designed to enable investors to detect irrational greed and fear in the global stock market. Empirical research shows that one of the best ways to forecast whether world stocks will go up or down is to assess whether investors are excessively bullish or bearish. Extreme bullishness and extreme bearishness is often followed by a strong price movement in the exact opposite direction.
Quoted as a value between 0 and 100, a figure under 30 is rated FEAR and associated with excesses in bearish sentiment resulting from investors' fear of uncertainty. On the other hand, a value higher than 70 is rated GREED and associated with excessive bullishness and greed in the global stock market. Historically, the GREED and FEAR ratings have had strong correlations with turning points in the global stock market. A rating of GREED, indicating excesses in bullish sentiment on the part of most global stock investors, often leads to a topping in the market and a downside correction. Similarly, a rating of FEAR, indicating high pessimism on the part of most investors, often leads to a bottoming in the global stock market and an upside reversal.
Using the indicator as a guide, investors will be able to dynamically adjust exposures in world stocks, tactically avoid long positions when the market appears overbought, and enter the market when the indicator signals an attractive buying opportunity.