Stock Market Confidence Meter: Use for Investing in the Stock Market

A simple, free, and useful tool for investing in the stock market. It's the Stock Market Confidence Meter: Use it for investing in the stock market.

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⚠️ This article is not investment advice. It is purely a personal opinion.. Investing involves risk of losing money.❗

My way of investing in the stock market

With the stock market, I like to invest regular amounts per month. That's why part of my salary is automated to buy stocks on the stock market. In fact, as soon as I receive my salary, part of it is automatically paid into an ETF.

Indeed, I don't like to look at current stock market performances and I prefer to spend the minimum possible time on the stock market. If possible, less than 5 minutes per month.

Stock market savings account

On the other hand, there is a stock market tool that I use to help me add money to the stock market from time to time.

In reality, I have a stock savings account where I put a small amount of my salary each month. With the help of the meter that I will present. When I think it is time to invest additional amounts in the stock market. I use the money from the savings account to buy more stocks than usual in order to increase my stock market assets.

Stock market down

In the stock market, performance is irregular.

For example, with a VOO ETF that tracks the SP500 stock index. We note that from February 2020 to February 2025, the progression is 88% in 5 years!

Although the performance is very good in 5 years, There are some very negative stock market periods !

For example, if I zoom in on a small period of this chart. From August 22, 2022 to October 12, 2022. It is concluded that the ETF stock has lost 15% of its value in 1 and a half months.

In this case, the meter that I will present to you in this article will display a very low stock market score!

therefore, I'm taking the opportunity to take some money from my stock market savings account to buy more shares than usual.

By the way, just out of curiosity, what is the stock market performance a month and a half later? That is, from October 12, 2022 to November 30, 2022?

+ 14% !

Fear and Greed Index

➡️ The tool I use is Fear and Greed Index. It's a free tool on the CNN website.

This is what it looks like 😊

⚠️ This stock market tool and the modes I will write are not an exact science. This article is not an investment advice. Just a personal opinion ❗

Why and how do you use this tool? 🤔

▶️ This tool, to summarize it quickly, is a stock market confidence meter, displaying a score between 0 and 100..

In reality, it reflects the confidence of the majority of the US population in the current state of the US stock market.

5 display modes

👉 There are 5 displays to consider:

Extreme Fear 😮

For example, if there is a global stock market crash that causes stock prices to plummet. The stock market sentiment meter will display between 0 – 25”Extreme Fear". Which means extremely fearful.

🔺 At this point, in most cases. The stock market is down and many people are selling their stocks at a low point because they are afraid that the stock market will crash.

Extreme Greed 😁

Another example, if the economy is reassuring and the stock market has been climbing for a while. In most cases. The confidence meter will be between 75-100 and will display “Extreme Greed“. In my opinion, the translation is extremely coveted.

🔺At this point, in most cases. Most people tend to buy the stocks because the stocks are going up sharply. Because they have hope that this rise will continue.

Neutral 😐

If the stock market shows a small return or a small loss. The meter displays "neutral”, which means neutral.

🔺At this point, people tend to behave in a “normal” way towards the stock market.

Fear or Greed 🙁😊

I think you got it:

Fear 🙁 means that the population is disappointed with the current stock market performance. But the majority of investors do not think that the current state of the stock market is a disaster.

Greed 😊 means that the population is satisfied with the current stock market performance. But without being extremely optimistic.

Example of the meter graph

To return to the example that I displayed at the beginning of the article 😉

Stock Market Confidence Meter: Use for Stock Market Investing

In this example, we see that the score is 55, in mid-August 2022.

👉 In this case, the meter shows that stock market confidence is generally neutral but rather optimistic.

To give an example, a month before, in mid-July 2022. The score of 23, showed that the majority of the population was very afraid of the stock market. This information is visible on the right of the meter.

Example with VOO

To have a practical example, I took a chart of the VOO ETF. The VOO ETF is an SP500 ETF that replicates the performance of the 500 most important US stocks.

Note that in mid-July 2022, the meter displayed a result of 23. That is to say, extremely fearful.

So, I took a stock chart of the VOO ETF from mid-July 2022 to the day I am writing part of this article. That is, early August 2024. Here is the result.

As we can see, there are 38% of profits in 2 years. On the other hand, the meter in mid-July 2024 displayed … 23, extremely fearful.

👉 In this case, we notice that despite an increase of 38% in 2 years. The meter displays “extremely fearful”.

Examples of variations of the measurer

The day I started writing this article (early August 2024), the meter shows a very poor score of 20. While a month ago, it showed 51. That is, neutral.

Stock Market Confidence Meter: Use for Stock Market Investing

If you want to know what mode the meter displays some time later, I took a screenshot on September 30, 2024. That is, 60 days after the last graph.

👉 We see that in 60 days. The graph went from 20 to 73. As such, being in extreme fear mode is not necessarily a stock market catastrophe. 😁

How do you use this meter?🧐

⚠ This article is only my personal opinion. Not an investment advice. Investing can cause loss of money 🔺

I use this meter to take a quick 30 second look every month. Just before I buy my monthly ETFs.

➡️ I am only interested in the meter when it is in “Extreme Fear” mode ⚠

In fact, in the majority of cases, when the stock market is in a state of sharp decline, it is in “Extreme Fear” mode. In my opinion, I consider this mode as the “stock market balances”.

▶️ In these moments, in my opinion, the stock market is cheap 😉

👉 Therefore, I take the opportunity to buy more ETF shares than usual by withdrawing some money from my stock reserve account.

Therefore, I'm hopeful that the price of the US ETF will rise a few months or years later. And that's usually the case 😁 (but not always ⚠).

How do you invest if the meter is not in “Extreme Fear” mode? 🤔

👉 If the meter displays fear, neutral, greed or extreme greed. I invest in the same way as usual. That is, 1 time per month the same usual amount.

Actually, I don't pay attention to this meter if the score is above 25.

Why not invest only when this meter only in “Extreme Fear” mode? 🤔

In my opinion, the strategy of buying only in extreme fear mode will not be effective in the long term.

👉 It is important to remember that the main magic of a growth ETF is compound interest. And to benefit from compound interest, you need to invest money regularly.

Therefore, I prefer to invest a large amount of money in my favorite ETF once a month and buy additional ETF shares when the stock market is down, rather than waiting for a possible “extreme fear” that may never come.

I hope you find this tool useful. 😊

Link to the Stock Market Confidence Meter – https://edition.cnn.com/markets/fear-and-greed

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Stock Market Confidence Meter: Use for Stock Market Investing