The section Today -> Market updates will show you a lot of arrows. Every daily pre-market update will show an arrow to give you a quick first impression of what the Greed and Fear indicator is expecting for the next trading session. What it does is, it tries to the predict how the S&P 500 will close for that session: higher or lower.
The S&P 500 and most other major market indexes move in tune with each other, like for instance: NASDAQ, Dow Jones Industrial, Dow Jones Transport, Russel 2000, SOX etc. The S&P 500 is simply a very broad index and the Greed and Fear indicator was programmed to focus on that particular index.
Why do I call these arrows Greed and Fear? Here's more about that. These are the possible arrows:
Their meanings are as follows:
- Greed: It is expected that the S&P 500 will close higher tomorrow than it did today. An intraday pullback is most likely a good buying opportunity (=go long).
- Fear: It is expected that the S&P 500 will close lower tomorrow than it did today. An intraday rally is most likely a good selling opportunity (=go short).
These signals can flip-flop every day. Once a (small) trend is developing, then one type of signal (either Greed or Fear) will likely be more prominent than the other. But even then, you may get an occasional opposite signal for one or two days. This is just the normal pullback in an up trend or rally in a down trend. If this opposite signal does not flip back to its previous value in the next couple of days, then the market is likely to end the current trend and possibly forming a reversal to develop a trend in the opposite direction.
Sometimes, the software has doubts too. If the output does not fall in a certain predetermined range, than the output is considered 'indecisive'. You will see this signal as a big question mark.
In a very tight range market, the indicator may start to flip flop from Greed to Fear and vice versa and become unreliable. If this happens the bulls and bears are fighting over a very important zone in the market. Once it breaks away, either up or down, expect a strong move. From that point on the indicator will probably become more consistent again.