On April the 26th I produced the chart below, suggesting to “fear the techs” and that investors should harvest gains due to the “LACK- OF- FEAR” spread between the Nasdaq 100 and the VXN index. This post took place one day after the high (so far this year), harvesting at a decent price point, as the Nasdaq declined over 15% in the next 60 days. (see post)
For those willing to scoring on defense, more “pocket change” was gathered on the decline. In the post below, I shared that a “Bounce” was due in the Nasdaq at support and to buy the NDX 100. (see post) Picked up more “pocket change” on this bounce, a quick 4% in four days. (see post)
In the chart below I wanted to update the “FEAR/GREED SPREAD” for the NDX 100.
As you can see in this chart the NDX 100 is within a few percent of the April highs, yet the VXN isn’t nearly as low, suggesting that investors aren’t as bullish now as they were at the April highs.
Bottom line…Based upon the “GREED SPREAD” this leading index most likely has more room to run on the upside. For those that are long this index, DO NOT HARVEST the NDX 100. Keep a 4% stop in place.
Price only is probably a better way to go. The market seems to defy logic (mine anyway) most of the time.
My intent was to measure spread distance, not the actual level of the VIX or NDX.
good comment on “green shoots” I don’t always do it, but I attempt to focus on what is at play, not why it is at play. Many time in the past 30 years, “reason why” were difficult to understand, yet price has always been easy.
I’m just an ole boring price guy…I buy price, sell price and watch patterns based upon price.
Hi Chris,
What I am referring to is the spread right before the crash 8NDX plunge) in late 2008 – it appears to me at least that the NDX and VXN are at about the same levels as they are now, so the spread would be similar or possibly even a little less than compared to now.
Since it is a measure of emotions, I am also wondering if the VXN needs to be “normalized” somehow for investors perceptions. It might have been a lot lower in April 2010 because of the perceived “green shoots” and economic recovery. Now there is not that perception given worries about a slow down and double-dip and the VXN could be considered relatively low right now within this context.
Thanks,
cK
Currently the “Greed spread” is not as wide as it was when the NDX peaked in 2008 and in April of 2010 when we harvested and scored on defense.
I guess I would add that the greed spread is also higher than it was in late 2008 before the crash.
The VXN is not as low as it was in April 2010, but it appears to be as low as it was right at the start of the late 2008 crash. So, wondering if it can be expected to get as low as April 2010 before a sell off starts.
Chris,
Great illustration, thanks!