chrism665

Fear/Greed Index

My goal was to create something akin to the Fear & Greed Index (https://money.cnn.com/data/fear-and-greed/) that CNN and others do.

A Fear/Greed Index can be used by any trader or investor but I believe it's best viewed with a contrarian's eye--
  • When the market appears to be signalling Extreme Fear, that is a good place to start buying from emotional players who want to sell no matter the price
  • When signalling Extreme Greed, that may be a good place to start taking profits off or getting hedged, as there may be too much exuberance in the air
  • Important to note and remember, however, is that there can often times be fear in the air for good reasons! I like to see this as if we dip into extreme fear and return shortly after, the fear may warrant constraint from buying, or returning back to extreme greed may be a very strong market extension

The script draws from several other tickers which I have read and personally observed to be decent macro correlations for the stock market (specifically the SP500 ). For the state of each of these metrics I gave a rating, good or bad, then added them together and put it into your standard Stochastic .

These macro correlations include--
  • The % of stocks in the SP500 above multiple Simple Moving Average lengths
  • VIX and its term-structure (contango, backwardation)
  • Treasury Bonds
  • Gold
  • Junk/High Yield Bonds
  • The Put/Call Ratio
  • The SP500 Options Skew
  • Advancing and Declining Issues

    On some of these I opted to use a function for the Relative Momentum Index instead of RSI , as the RMI oscillates better (in my opinion). I also used a Band-Pass Filter/ Double EMA for smoothing the results of the stochastic .

    A LOT of these numbers were made to my own observation and discretion and can get out-dated over time. With that said, PLEASE feel free to revise, fine tune, modify this as you wish to optimize yours. And please let me know if I have made any mistakes here or something should be added.
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