What Does My Favorite Pie Chart Say About Stocks Today?

Pie Chart of Fear and Greed

As I write this, it’s Pi Day (3/14) and I’d be remiss if I didn’t share a pie chart. I hope you’re willing to count half a pie as a pie chart, because I’d like to take a quick look at the Fear & Greed Index.

Here’s the thing I’d like you to know. Fear & Greed suggests that there’s more pain to come.

First, I think that Friday’s close of 21 is overstated. As you know, the Junk Bond Demand indicator remains broken and I would disregard that Greed reading that it shows.

Second, Sentimentrader created a proxy version of Fear & Greed that’s pretty close. It’s a different calculation than mine, but it’s a good check on Fear & Greed. And theirs closed at 9 yesterday. I think that’s about where CNN's version should have been, too.

About a decade ago, I ran a test on the Fear & Greed Index. When it fell below 10, it was often a decent buying signal. Generally, one month later, the market was higher. The thing is, during that month, the market could drop more. Also, during periods like 2008 and 2020, you could lose significantly.

So, a decline below 10 really just means that volatility is expected to be high.

Last, Extreme Fear does not mean “buy.” If it did, then we’d see the indicator make nice little V-shaped bottoms. But it rarely does that. More common are W-shaped bottoms.

You can see that in this historical chart of the Fear & Greed Index. Vs happen during uptrends and Ws happen in downtrends.

So, while we’ve entered bounce territory, I think it’s more likely to see a dead cat bounce than something that will put us back on track for new highs.

A Few Favorite Articles This Week

In How Low Can the Dow Go?, Louis Llanes shows us how he performs a bottom-up forecast on the Dow and tells us that a run-of-the-mill correction would take the Dow down to 36,592, while a recessionary correction could see the Dow at just over 31,000. In other words, Louis thinks we may only be half-way through with this drop.

There's nothing we can do about the market's decline. The only thing we have control over is how we manage our portfolios. And, while some may run and hide, we at TheStreet Pro would rather take some spare cash and begin to look for places to use it, when the time is right.

Ed Ponsi checks the charts to tell us where we might consider buying three of the biggest stocks out there in What's the Right Price to Buy Apple, Nvidia, and Meta.

Last, Maleeha Bengali shares her thoughts on why the S&P 500 Turmoil Marks the End of Passive Investing. 

A Few of My Favorites From Around the Arena

One problem with cars today is that every manufacturer wants to mimic Tesla and remove the buttons that control the radio and heater and other important functions. Now VW, my longtime favorite car brand, is bringing back the button. Thanks VW! And thanks Autoblog for reporting on it. The new site looks great!

Since I'm writing this before dinner on Pi Day, here's one from Parade with Gordon Ramsay's favorite Shepherd's Pie. If you make it, please report back!

And... one more from Parade in honor of Pi Day. To cap off Gordon Ramsay's fave, enjoy one of these 85 pie recipes. I'll take number 3.

Have a great weekend!