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The Fear and Greed Index (developed by CNN Business
) is a measure of investor sentiment, which ranges from extreme fear to extreme greed. The thinking is that “excessive fear” leads to lower stock prices, and “too much greed” leads to higher stock prices, according to the index. Thus, it can help investors determine whether stocks are priced fairly.
How does the Fear and Greed Index work?
The index — a score from 0 to 100 — is calculated by analyzing seven different indicators that measure market volatility, investor sentiment and other factors that impact the stock market.
The seven indicators are:
Market Momentum: This measures the performance of the S&P 500 index against the moving average over the past 125 days. If the S&P 500 index is rising, it indicates that investors are optimistic about the economy and the stock market.
Stock Price Strength: This measures the number of stocks on the New York Stock Exchange (NYSE) that are trading at their 52-week highs, compared to the number of stocks trading at their 52-week lows. More highs than lows indicates that the market is strong and investors are optimistic.
Stock Price Breadth: This measures the number of stocks that are rising versus falling. If more stocks are rising, it indicates that investors are bullish.
Put and Call Options:This measures the ratio of put options (which are like a contract that gives the owner the option to sell an underlying asset) to call options (which gives the owner the option to buy an underlying security). If more investors are buying put options, it indicates that they are trying to protect their investments against a potential downturn in the market.
Junk Bond Demand:This measures the difference in yields between high-risk, high-yield junk bonds and safer government bonds. Increasing demand for high-yield bonds indicates that investors are willing to take on more risk, which the index factors as a sign of “greed.”
Market Volatility: This references the Cboe Volatility Index (VIX), a predictive measure of expected changes in the S&P 500 Index options over the next 30 days. Over time, a low VIX index indicates a bull market and high index indicates a bear market.
Safe Haven Demand: This measures the demand for Treasury bonds compared to riskier stocks. If the demand for bonds is higher, it indicates that investors are fearful and are seeking safe havens to protect their investments.
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How is the Fear and Greed Index used?
The Fear and Greed Index is used by investors to gauge the overall sentiment of the market and to help make informed decisions about buying or selling stocks.
Each indicator is given equal weight in determining an index between 0 and 100. When the index is high — showing greed or extreme greed — it indicates that investors are optimistic and are buying stocks. When the index is low — showing fear or extreme fear — it indicates that investors are fearful and are selling stocks.
Fear and Greed Index
Index score
Extreme Fear
Extreme Greed
Source: CNN Business
For example, in March 2020 at the beginning of the COVID-19 pandemic, the Fear and Greed Index dropped to an annual low of 2. This was due to the uncertainty and fear surrounding the pandemic, including a travel ban. Investors moved to sell their stocks and seek safe havens, and the stock market experienced a significant decline
.
Limitations of the Fear and Greed Index
While the Fear and Greed Index can be a useful tool for investors, it is not a perfect indicator of market sentiment. The index is based on a limited number of indicators and doesn’t predict other factors that can impact the stock market, such as geopolitical events and economic data.
The Fear and Greed Index is also not the only tool that investors use to assess the market’s mood.
GuideWell Mutual Holding Corp., the parent company of health insurer Florida Blue, is the biggest company headquartered in Jacksonville.
But as a mutual holding company that doesn’t publicly report financial results, we don’t often have a chance to know how big it is.
However, as the company announced the appointment of a new chief financial officer Sept. 27, its news release indicated GuideWell has grown significantly in just the last two years.
The announcement of Jeffrey Goddard’s appointment said GuideWell has grown into a “health solutions enterprise” with annual revenue of $30 billion.
That would make GuideWell one of the 150 largest U.S. companies, based on Fortune 500 data. But Fortune magazine’s annual list of largest companies doesn’t include businesses that don’t publicly report data.
Just two years ago, GuideWell was saying annual revenue was at $20 billion.
The company did expand in February 2022 with the acquisition of Triple-S Management Corp., licensee of the Blue Cross Blue Shield insurance brand in Puerto Rico, adding about $4 billion in revenue.
Besides Florida Blue and Triple-S, GuideWell said it owns or has significant interests in several other health care businesses.
GuideWell is about double the size of the largest Jacksonville-based company in the Fortune 500.
Railroad company CSX Corp. ranked 279th with 2022 revenue of $14.86 billion.
GuideWell said Goddard joined the company as executive vice president and CFO, succeeding Thurman Justice, who took over leadership of the managed care business at Triple-S.
Goddard was most recently senior vice president and CFO for CVS Caremark.
ICE: Black Knight deal helps mortgage ‘ecosystem’
After Intercontinental Exchange Inc. agreed in May 2022 to acquire Jacksonville-based mortgage technology firm Black Knight Inc., antitrust officials were concerned the deal would give ICE too much control over mortgage technology in the U.S.
Now that the deal is completed, ICE officials said in a Sept. 28 conference call the merged businesses will benefit everyone involved in the mortgage process.
Ben Jackson, president of ICE’s mortgage technology business, said the company was convinced when it agreed to buy Black Knight that the deal would result in an improved mortgage workflow.
“Over the last 16 months, our confidence in that strategic vision has only increased,” he said.
ICE’s technology will be able to handle mortgage loans from origination to final settlement “in one digital ecosystem,” Jackson said.
Black Knight dominated the market for technology for servicing existing home loans, handling processing for nearly two-thirds of all first mortgage loans.
ICE is the market leader in technology for originating mortgage loans.
“The breadth and depth of what we have assembled touches nearly every home mortgage in the United States and is a platform that we believe will enable us to provide the foundation for improving risk management in this major consumer credit market,” ICE Chief Executive Jeff Sprecher said in the conference call.
“Together with Black Knight, ICE is well positioned to improve the execution and subsequent settlement and servicing of U.S. home mortgages, the major credit exposure for most U.S. consumers,” he said.
To satisfy antitrust concerns and gain Federal Trade Commission approval for the merger, the companies agreed to sell off Black Knight’s loan origination technology business called Empower and its data subsidiary Optimal Blue.
However, the deals to sell those units to Constellation Software Inc. included an agreement that will give ICE mortgage technology clients access to Optimal Blue’s data services under its new ownership.
While ICE’s mortgage technology operations serve business customers, Sprecher said the merged company will be able to provide data that will help its clients deal with consumers.
“With Black Knight, we are now in a position to see data and micro trends that give us valuable insight into existing homeowners and prospective homeowners in the United States,” he said.
Black Knight is a successor to a long line of Jacksonville-based companies that have provided mortgage technology services since the 1960s.
ICE has not announced any specific plans for Black Knight’s Jacksonville operations after the merger.
A company spokesperson said in an emailed statement Oct. 3: “With about two thousand people already in Jacksonville, and room to grow, it will quickly become an important part of ICE’s operations.”
Atlanta-based ICE provides financial technology in a number of areas and is best known as operator of the New York Stock Exchange.
Jackson said in the conference call that with Black Knight added to the company, the mortgage technology business will increase from 14% of ICE’s total revenue to 25%.
St. Joe gains help chairman’s fund
Reuters news service reported that a strong third-quarter stock performance for The St. Joe Co. helped its chairman’s mutual fund produce some of the best returns for the quarter.
St. Joe Chairman Bruce Berkowitz’s Fairholme Fund controls about 34% of the company’s stock, according to its latest Securities and Exchange Commission filings, and Reuters said the fund has more than 80% of its assets in St. Joe stock.
As the overall market fell in the third quarter, St. Joe’s stock rose 14%, with a big gain in late July after the real estate development company reported strong third-quarter earnings.
As a result, Fairholme rose 17% in the quarter while another fund with a large stake in St. Joe, the Schwartz Value Focused Fund, rose nearly 15%, Reuters said.
Meanwhile, the Dow Jones Industrial Average fell 2.6% and the S&P 500 fell 3.6% in the quarter.
Panama City Beach-based St. Joe was a long-time conglomerate headquartered in Jacksonville before selling off its other businesses to focus on real estate development.
The company moved the headquarters to the Florida Panhandle in 2010 to be closer to its real estate holdings.
High rates affect Dream Finders, other homebuilders
Dream Finders Homes Inc. was the best-performing stock among Jacksonville-based companies in the first half of 2023, nearly tripling in price.
However, continued high interest rates are hurting the homebuilder sector, and Dream Finders’ stock has dropped sharply since peaking in early August.
The stock ended the third quarter at $22.23, down nearly 30% from its Aug. 7 peak of $31.60 and down nearly 10% for the entire third quarter.
However, Dream Finders still had a net gain of more than 150% for the first nine months of the year.
FPL parent’s stock drops sharply
NextEra Energy Inc.’s stock dropped sharply after a related business said it was cutting its growth expectations.
Juno Beach-based NextEra is the parent company of Florida Power & Light, which provides electricity to 5.8 million Florida customers. It serves most of the state’s East Coast outside of Jacksonville.
NextEra formed a limited partnership in 2014 called NextEra Energy Partners, or NEP, to own and manage clean energy projects.
The limited partnership announced Sept. 27 it was cutting the expected growth rates for distributions to its shareholders to 5% to 8%, with a target growth rate of 6%, down from the previous level of 12% to 15%.
NEP cited tighter monetary policy and higher interest rates for the cut.
That caused NEP units to lose more than half their value, falling from about $50 two weeks earlier to a low of $24.25 on Oct. 2.
NextEra’s stock fell from the upper $60s to a low of $50.18 on Oct. 2.
Wells Fargo analyst Neil Kalton cut his rating on NEP from “overweight” to “equal weight” Oct. 2 and cut his price target from $80 to $33.
“Despite a still strong secular backdrop for renewables and a high quality sponsor (NEE), NEP’s existing cost of capital raises questions about the partnership’s ability to execute on growth initiatives,” Kalton said in his research note.
In a Sept. 28 note, J.P. Morgan analyst Jeremy Tonet said he was maintaining his “overweight” rating on NextEra Energy Inc., or NEE, after the NEP announcement.
“While these concerns and sharp NEP weakness could weigh on NEE in the near-term, we see the sell off as overdone. We still see FPL as one of the best utilities in the country (benefiting from a constructive regulatory backdrop and favorable economic trends),” Tonet said.
FEC Railway expanding intermodal services
The Jacksonville-based Florida East Coast Railway announced a deal Sept. 27 that will expand its intermodal business.
FEC, which operates a 351-mile railroad from Jacksonville to Miami, said it agreed with Norfolk Southern Corp. to provide intermodal service at FEC terminals in Fort Pierce and Fort Lauderdale.
Norfolk Southern was already providing services at FEC terminals in Miami and Titusville, it said.
Atlanta-based Norfolk Southern is the main competitor of CSX, providing railroad services in much of the Eastern U.S.
Its railroad connects to FEC’s rail line in Jacksonville.
FEC said the new agreements will help it offer services for freight customers to more U.S. cities outside of Florida.
FEC is owned by GMXT, the transportation subsidiary of Mexico City-based Grupo Mexico.
GMXT acquired the Florida railroad in 2017.
Safe & Green Holdings spinoff completed
Safe & Green Holdings Corp. completed the spinoff of its real estate development subsidiary into a separate company on Sept. 28, and Safe and Green Development Corp. is now trading on Nasdaq under the ticker symbol “SGD.”
Safe & Green Holdings continues to trade under the ticker “SGBX.”
The company’s main business is converting cargo shipping containers into buildings, and it announced its plan to spin off its real estate development company in December 2022.
The company was formerly known as SG Blocks and was headquartered in Jacksonville, but it moved its offices to Miami in early 2023.
Simple moving averages are one of the indicators that investors use in technical analysis to help them choose stocks. They’re the average of a range of the prices of a stock over a given time period.
Here’s how to calculate simple moving averages, what they represent, and how to use the information they provide.
What Is Simple Moving Average (SMA)?
A simple moving average is the average price of a stock, often its closing price, over a specific period of time. It’s called “moving” because stock prices always change. As a result, charts that track SMA move forward as each new data point is plotted. Investors use simple moving averages and other technical indicators to help them get an idea of the direction a stock price is moving based on previous prices.
While simple moving averages can give investors a sense of what could happen in the future, they have limitations. That’s because simple moving averages reflect past data, so they only represent past trends. 💡 Quick Tip: Look for an online brokerage with low trading commissions as well as no account minimum. Higher fees can cut into investment returns over time.
Formula for Simple Moving Average
To calculate a simple moving average, Investors take the average closing price of a financial security and divide it by a set number of periods.
The formulas is as follows:
SMA = (P1 + P2 + P3…+ Pn)/n
P is price and n is the number of periods.
Let’s take a look at an example of stock price over a period of 10 days.
Day (n)
Closing price (P)
1
$40
2
$42
3
$47
4
$51
5
$46
6
$44
7
$40
8
$38
9
$37
10
$36
To arrive at the simple moving average, first total the closing prices and divide by the number of periods.
On day 11, if an investor wants to continue looking at a 10-day average, they would drop the first data point in the list above and add the closing price from the eleventh day, shifting the moving average forward by one data point. They would continue to do this for each subsequent day, and in this way, the average continues to move.
What Does SMA Show You?
Analysts often plot simple moving averages as a line on a chart of individual data points. The line helps smooth out movement, making it easier to identify trends. If the line representing the SMA is moving up, then the price of the stock is trending up. Conversely, if the SMA is moving down, prices are also trending downward.
For long-term trends investors typically look at SMA over 200 days, while intermediate trends may focus on a 50-day period. Short-term trends typically use fewer than 50 data points.
Longer-term SMAs can help smooth out stock volatility, but they also have the biggest lag when compared to current prices.
What Are Crossover Signals?
Investors may chart two SMAs — one relatively short and the other long — to generate crossover signals, points when the lines cross, which can help identify moments to buy or sell a stock.
When the shorter moving average crosses above the longer moving average, it is known as a “golden cross.” This is a bullish signal that tells investors that stock prices are trending in the upward direction. On the other hand, a bearish “death cross” occurs when the shorter moving average crosses below the longer moving average. This is a signal that prices are trending down.
What Are Price Crossovers?
Price crossovers are another signal investors may generate to help them identify moments to buy and sell. When a stock’s prices crosses over the moving average, it generates a bullish signal, and it generates a bearish signal when stock prices crosses under the moving average.
One Step Behind
Though analysts use SMAs to identify trends, they are still lagging indicators. SMAs reflect events that have already taken place, making it a “trend following” metric. In other words, they’ll always be a step behind what is happening in real time. As a result, SMAs do not predict future prices, but they can provide investors with some insight into where prices may be going. 💡 Quick Tip: Are self-directed brokerage accounts cost efficient? They can be, because they offer the convenience of being able to buy stocks online without using a traditional full-service broker (and the typical broker fees).
SMA vs Other Moving Averages
There are other moving averages investors may use when performing technical analysis on a stock. These help investors flesh out recent trends in stock price movement, but they also tend to be a bit more complicated to calculate.
SMA vs Weighted Moving Average
Like SMAs, weighted moving averages (WMAs) help establish the direction in which a stock price is likely moving. However, they put more emphasis on recent prices than SMAs.
Investors calculate a WMA by multiplying each data point by a weighting factor. That gives more weight to recent data and less weight to data farther in the past. The sum of the weighting must add up to 1, or 100%. Simple moving averages, on the other hand, assign an equal weight to each data point.
The formula for WMAs is:
WMA = Price1 x n + Price2 x (n-1) +…Pricen/[n x (n+1)]/2
Where n is the time period.
SMA vs Exponential Moving Average
An exponential moving average (EMA) also gives more weight to more recent prices. However, unlike WMAs, the rate increase between one price and the next is not consistent — it is exponential. Analysts typically use EMAs over a shorter period of time, making them more sensitive to price movements than SMAs are.
The formula for EMA is:
EMA = K x (Current Price – Previous EMA) + Previous EMA
K = 2/(n+1)
n = The selected time period.
For first-time EMA calculations, previous EMA is equal to SMA, an average of all prices over a number of periods, “n”.
Which Moving Average Is Better?
Each moving average has its own place in an investor’s tool belt. Investors may use WMAs and EMAs — which emphasize recent data — if they are worried that lags in data will reduce responsiveness. Some investors believe that the exponential weight given by EMAs makes them a better indicator of price trends than WMAs and SMAs.
Some more complicated indicators require a simple moving average as one input for calculations.
The Takeaway
If you’re just starting out as an investor, it can be hard to know which stocks to buy and when to buy them. Technical analysis strategies, such as moving averages, can help narrow your search and clue you in to potentially advantageous times to buy or sell.
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