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.

Why is keeping an eye on sentiment and mood important ?

Market sentiment is a powerful force driven by emotions and perceptions. It impacts investors' decisions, from day traders to long-term investors, and helps identify opportunities.
Market sentiment reminds us that finance is a human endeavor, and understanding it empowers traders and investors to make informed choices in the dynamic world of finance.

The concept of emotions running the markets is rooted in the history of value investing. Ever since Graham’s adage to Mr. Market in his book 'The Intelligent Investor', it has been clear that panic, euphoria, and apathy are what cause upswing and downswings.

If we can get a sense of stock market sentiment ,
we could make better decisions and achieve better results !

In a nutshell : emotions are what drive the market, not necessarily fundamentals. 

Why to follow up on stock market sentiment ?

Market sentiment plays a vital role in finance, influencing the behavior of investors and shaping the direction of financial markets.
Many investors are emotional and reactionary, and fear and greed sentiment indicators can alert investors to their own emotions and biases that can influence their decisions.

The primary aim of stock market sentiment 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.

However, it's necessary to approach them with a balanced perspective. While market sentiment indicators provide critical insights, they should not be treated as the sole judge of the financial market's future.

What is the current market sentiment ? What is the market sentiment now ?

We can only try to measure market mood or sentiment.  It is an attempt.  There are 9 indicators that can be used to get an idea of the stock market sentiment.  The Graham Mood Index is one of them.  This is the only website that tracks this sentiment index.

What is the Graham Mood Index - also called Graham Sentiment Index?

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. 
The metaphorical figure "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 - Graham's metaphor for the collective mind of investors -  is simple.  But the question is :  is it possible to somehow 'measure' Mr Market's mood ?

It is certainly worth a try : I designed the Graham Mood Index to get a sense of Mr Market's current mood. 
The outcome of the model is a number that changes between 1 and 99.

The Graham Mood Index, also called Graham Sentiment Index,  is represented in a numerical value ranging from 1 to 99, 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.

How can the Graham Mood Index help ?

The Graham Mood Index is an attempt to measure the overall stock market mood. 
The closer the Graham Mood Index gets to 1, the more likely it is that investors are probably selling too heavily and probably undervaluing the market. As the index rises toward 99 it means that investors are probably buying too heavily and probably overvaluing the market. publishes its Graham Mood Index (almost) every day.

Hopefully, the Graham Mood Index 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 Graham Mood Index for forecasting ?

No , the Graham Mood Index is not built for forecasting.  It is important to recognize that the Graham Mood Index is not predictive in nature. 
Just to keep a finger on the pulse. It helps to stay focused. 
The Graham Mood Index is , just like any other fear and greed index , a small piece of information that adds to a bias, no more than that.

Why is the Graham Mood Index different ?

The Graham Mood Index is different from any other 'fear and greed index' or 'market mood index' or 'investor sentiment index' because
the GMI (Graham Mood Index) moves faster.

For example : a fear and greed index is still in 'greed' modus while the Graham Mood Index is already pointing to a 'fear' modus.

Mood and Sentiment are different concepts. Please explain ?

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

Mood is a psychological concept and refers to a mild but persistent emotional state. 

Sentiment is a concept of behavioral finance. 

If you are interested in this topic , please read the pdf : difference between sentiment and mood in the stock market.

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 sentiment of mood barometer is like a weather barometer :  it is just an indication.

What is your approach short term trading ?

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

Having a bias based on sentiment analysis is only a starting point.

Is short term trading profitable ?

There is no guarantee short term trading is profitbale.... but I truly believe that anyone can trade profitably – provided they have the right attitude , commitment and a strong desire to succeed.
Short term trading reminds me so much of fishing. You always have to keep your line in the water. You'll catch lots of small fish, some of them will get away (loss), but every once in a while you'll catch a monster!

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.

Trading is not for everyone, you have to be a risk taker.  It takes time and practice to get used to it. A lot of traders break down when they lose.  If you can handle the risk and pressure day to day, you could be a successful trader. Also the money you put into trading is money that you can afford to lose.

What is the difference between investing and trading ?

Rather than being swayed by the capricious nature of stock prices, stock investors consistently focus on the underlying business value.  Investors belief that investing in companies with strong business models and potential will, given enough time, yield solid returns. It's not about quick wins or fleeting market trends but about investing in a business's inherent value bought at a fair price.

Trading is the opposite : it is about quick wins , trying to reap profits from short-term movements in stock prices. 

How to combine market mood and stock investing ?

What a stock investor must be wary of are the huge fluctuations in the near term as a result of exuberant optimism and pessimism. However these mood swings can be used to her/his advantage. If s/he invests with a long-term mindset and invest in good companies when Mr. Market is feeling especially run down, s/he will reap the gains of both quality fundamentals, as well as those from Mr. Market’s positive mood swing.

Overview of stock market mood and sentiment indicators

Over the years, various gauges have been devised to capture the influence of investor emotions.

At Stock Market Mood Today you can follow up to 9 market sentiment and market mood indicators

  • Graham Mood Index
  • Fear and Greed Index
  • AAII Sentiment Survey
  • Market Mood Index
  • iSaham Market Mood Index
  • NAAIM Exposure Index
  • Equity Put / Call ratio
  • VIX
  • VIX Put / Call ratio