Answers to your questions about market mood and market sentiment

Do you have a question ?

This site is 100 % about Stock Market Mood and Stock Market Sentiment. 
Make sure to spend a few minutes browsing through this site.  If you have a question about market mood and market sentiment , you can probably find the answer below.
Don't have any questions ?  Continue to see my Blog.

What is the Market Mood Model ?

Market Mood was coined by influential investor and researcher Benjamin Graham.  In his 1949 book “The Intelligent Investor”
Graham uses the allegory of ‘Mr Market’ to explain the stock market mood. 
Mr. Market is a hypothetical investor who is driven by panic, euphoria, and apathy on any given day, and approaches his investing as a reaction to his mood.
Modern interpretations would describe Mr. Market randomly swinging from bouts of optimism to moods of pessimism.
source : investopedia

The concept behind Mr. Market is simple.  But the question is :  is it possible to somehow 'measure' Mr Market's mood ?

It is certainly worth a try : I designed a Stock Market Mood Model to get a sense of Mr Market's current mood.

What is the current Market Mood ?

The Market Mood Model is designed to get a sense of Mister Market's current mood. 

The © Market Mood Model distinguishes 2 moods  : 'good' or 'not so good'.

You can find the current market mood here.

What is mood ?

Mood is a temporary state of mind or feeling.
The word 'temporary' is crucial.
Source : Oxford Languages

What does 'Mr Market is in a good mood' mean ?

It is Mr Market who sets the price.  When in a good mood, it is likely Mister Market names a higher price.
Mr. Market is willing to pay more on average and the price valuations are likely to expand.

What does 'Mr Market is in a not so good mood' mean ?

Sometimes Mr Market is in a 'not so good mood' according to the model.  He sees trouble ahead.  On these occasions, he will likely name a lower price.

How is the Market Mood Model built ?

A combination of the following factors :
   1) Major news headlines
   2) Group of selected stocks
   3) Overall stock market price action
   4) Market Breadth
   5) Stock ranking
These are the factors I include in the Market Mood Model.
All factors have an equal weight of 20 %.
The goal is to keep a finger on the pulse.

Is the Market Mood Model useful ?

The Market Mood Model tries to get a sense of Mr Market's current mood.  The Market Mood Model switches fast between 'good mood' and 'not so good mood'.  It is built that way.  
Is that useful ?  It is probably more useful for a short term trader than for a buy and hold investor.  
Investors think longer term and could also take advantage of Mister Market's mood swings. 
Extreme readings on a sentiment or mood indicator may cause some investors to take a contrarian view.  For example : "buy when there is fear, sell when there is greed."

The general idea is : Use 'mood' wisely !

How can the Mood Model help ?

The Market Mood Model is an attempt to measure the overall stock market mood. 
The biggest advantage is that it helps to stay focused.

Hopefully, the Market Mood Model can benefit you, sooner or later, in making your own trading and investing better.

Important : Don't judge too quickly. Follow up on stock mood and stock sentiment changes for at least 3 months.

Can I use the Market Mood Model for forecasting ?

No , the Market Mood Model is not built for forecasting.  It is important to recognize that the Market Mood Model is not predictive in nature.  Just to keep a finger on the pulse.  It is a small piece of information that adds to a bias, no more than that.

How many mood changes are there each month ?

Every month is different.  Mr. Market can stay in the same mood for one day,  several days or even weeks.  Expect at least 5 mood changes each month.
Be aware : his mood can change at any time.
Follow up on his mood changes here.

Sentiment indicators explained in a different way !

Sentiment and mood indicators work like a barometer.  A barometer is an instrument that measures atmospheric pressure.  For a long period of time a barometer was the only instrument one could use to have a clue about the weather.  When the atmospheric pressure was high , people expected calm and nice weather. 
When the atmospheric pressure was low , people expected bad weather, without knowing how bad it would be and how long the bad weather would last. 
The barometer reading was only a clue, because the reality could be different than the expected weather.  But at least people had some indication of what could happen.  A stock barometer is like a weather barometer :  it is just an indication.

Why the Market Mood Model is different ?

The Market Mood Model or MMM is different from any other 'fear and greed index' or 'market mood index' or 'investor sentiment index'.
The reason is twofold :
1) These indexes are generally represented in a numerical value ranging from 0 to 100, with 50 being neutral. Scores below 50 indicate pessimism and negative or bearish market sentiment. If the score climbs above 50, it demonstrates optimism and bullish sentiment. Stock traders and investors can use this metric for informed decision-making. Investors can also use this to understand the overall market sentiment and decide accordingly.
On the other hand : the Market Mood Model has only 2 values :  good or not so good.

2) The Market Mood Model is faster.  For example : a fear and greed index is still in 'greed' modus while the Market Mood Model changes from a 'good mood' to a 'not so good mood'.

Market Mood and Market Sentiment are different concepts. Please explain ?

This is not so easy to explain.
Sentiment is a concept of behavioral finance. 
Mood is a psychological concept and refers to a mild but persistent emotional state.
If you are interested in this topic , please read the pdf : difference between sentiment and mood in the stock market.

Why to follow up on overall stock market mood ?

The primary aim of market mood analysis is to get in sync with the market.  To gain a sense for the bias of the market.  To assess the current conditions and confirm suitability for opening a new position.

What is your approach short term trading ?

Having a bias is only a starting point. My approach for short term trading is
1) short term bias overall stock market
2) short term bias for a specific stock
3) trying to get in - long only

Is short term trading profitable ?

There is no guarantee short term trading is profitbale.  I believe it can be profitable with the right attitude.

How did you start short term trading ?

I started short term trading very modest.  I learned while risking only small amounts of money.  I think that is the best way to get a feel for short term stock price movement.

Overview of stock market mood and sentiment indicators

At Stock Market Mood Today you can follow up to 9 market sentiment and market mood indicators.  A description of each sentiment indicator is given below.

***  The CNN Business Fear & Greed Index

The Fear & Greed Index is a way to gauge stock market movements and whether stocks are fairly priced. The theory is based on the logic that excessive fear tends to drive down share prices, and too much greed tends to have the opposite effect.

***  The AAII Sentiment Survey
The AAII Sentiment Survey offers insight into the opinions of individual investors by asking them their thoughts on where the market is heading in the next six months and has been doing so since 1987.

*** Market Mood Index for Indian stock market
The MMI (Market Mood Index) was developed by a team of data analysts and finance experts at MarketPsych, a company that specializes in quantitative behavioural finance research. The index was first introduced in 2004 and initially, the Market Mood Index was based on a survey of investor sentiment, in which participants were asked to rate their level of optimism or pessimism about the stock market. However, as the MMI evolved, it began to incorporate more sophisticated methods of data analysis, including natural language processing, sentiment analysis, and machine learning algorithms.

*** The iSaham Market Mood Index
A Market Mood Index for the Bursa Malaysia.  Investors can use the Market Mood Index to gauge overall market sentiment and make investment decisions accordingly.

***  The NAAIM Exposure Index
As the name indicates, the NAAIM Exposure Index provides insight into the actual adjustments active risk managers have made to client accounts over the past two weeks.  It surveys its members concerning their firms’ overall equity exposure and this is used to compute the NAAIM Exposure Index.

*** The VIX index
The VIX Index is a calculation designed to produce a measure of constant, 30-day expected volatility of the U.S. stock market, derived from real-time, mid-quote prices of S&P 500® Index (SPX) call and put options. On a global basis, it is one of the most recognized measures of volatility -- widely reported by financial media and closely followed by a variety of market participants as a daily market indicator.

*** Put / Call
The SPX Put/Call Ratio is an indicator that is used to gauge market sentiment. This is calculated as the ratio between trading S&P 500 put options and S&P call options. A high put/call ratio can indicate fear in the markets, while a low ratio indicates confidence.

*** IMX
The Investor Movement Index, or the IMX, is a proprietary, behavior-based index created by TD Ameritrade designed to indicate the sentiment of retail investors. 
Using data from one of the nation’s largest online investment communities, the IMX gives you a snapshot of investor sentiment. It does this by analyzing and averaging the holdings/positions, trading activity, and other data from real portfolios held by real investors each month and boils it down to an index.

*** The Market Mood Model
The Market Mood Model is designed to get a sense of Mister Market's current mood. Used as an allegory, Mr. Market is an imaginary investor devised by Benjamin Graham.
Mr. Market is a hypothetical investor who is driven by panic, euphoria, and apathy on any given day, and approaches his investing as a reaction to his mood.
Modern interpretations would describe Mr. Market randomly swinging from bouts of optimism to moods of pessimism.

The © Market Mood Model distinguishes 2 moods : 'good' or 'not so good'.