The distance with 125MA is a component of the Fear and Greed Index
It represents a long-term average price of an index.
When the current price is significantly above the 125MA, it suggests investors are feeling optimistic and potentially euphoric, pushing prices higher.
Conversely, when the price is significantly below the 125MA, it might indicate investor fear or pessimism, potentially leading to selling and lower prices (one example in the chart: June 2022).
The distance between the price and the 125MA helps gauge investor sentiment. A large distance (price far above or below the 125MA) can be a warning sign of potential market corrections.
Knowing the prevailing sentiment (greedy or fearful) can help investors make informed decisions.
For instance, during periods of greed (price well above 125MA), investors might be more cautious and consider taking some profits off the table.
The chart shows:
1) Re-visits to 125MA are common even in bull markets, that was the case even in 2018 when the market was over-extended.
2) The path to 125MA does not happen in one day, it is a consolidation process that lasts several weeks, and most of the times cut in half the potential decline relative to the peak, since the 125MA continues moving up.
IF THAT WAS THE CASE THIS TIME, $5050 - $5110 can still be support.
$SPX closed Monday with a potential evening star $SPDR S&P 500 ETF Trust(SPY)$ $iShares Russell 2000 ETF(IWM)$ $Invesco QQQ Trust-ETF(QQQ)$ $NASDAQ 100(NDX)$ $Tesla Motors(TSLA)$
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