Further adding credibility to this optimistic backdrop, the S&P 500 index is exhibiting the trend-following positive momentum condition, as it sits above its 125-day moving average. Active investors are pushing the market higher with a never-ending cycle of buying and selling stocks. They are required to traverse a highly nuanced economic landscape replete with thousands of private means. The index is built on a detailed methodology which incorporates seven key market indicators to assess general market sentiment. This evaluation generates an overall score, which ranges from 0-100.
A score of 100 represents peak levels of investor greed, and a score of 0 means 100% fearful. However, currently, the S&P 500’s distance above its 125-day moving average means that investor sentiment is biased toward optimism. Recent economic developments have conspired to make this particular scenario all the more important. As you might have heard, last month the unemployment rate reached a four-year high. Such figures underscore worsening alarms about the state of the US economy, as Americans experience an affordability crisis.
Even with the S&P 500 shooting upward, market watchers warn that equities are riskier overall than fixed income. The index’s highly detailed and specific scoring system makes this volatility very clear. Any ratio greater than 1 indicates a trend is bearish, indicating possible market declines. We know how easily market performance can swing in a given direction because of the impact from just a handful of large-cap stocks. These dynamics can bias wider impressions of the market.
Net new 52-week highs and lows on the New York Stock Exchange (NYSE), NYSE net new highs/lows very strongly leading the S&P 500. Investors can use them to take the market’s temperature in an instant. These two metrics can help investors understand how many stocks are making extreme moves in both positive and negative directions. That data is essential for investors looking to make informed decisions in an all-too-often boom-bust market.
Presently, there are other big challenges that further complicate this financial landscape. As the unemployment rate rises and affordability in housing and home ownership continues to worsen, analysts are starting to doubt the sustainability of recent market benefits. She noted that the perception of risk is still very acute with investors as they look to avoid traps in a landscape where uncertainty still exists.