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Technical Analysis Glossary

Greed/Fear Indicator (GFI)

The Greed/Fear Indicator (GFI) is TheGreedyTrader.com proprietary stochastics indicator that allows measuring individual stocks and Sector/Industry overvalued/ undervalued conditions. It fluctuates from 0% to 100%. The Sector/Industry GFI allows measuring sectors and industry relative ranks. It is based on technical indicators of all sector/industry members for S&P 500 stocks.
Research shows that low indicator range usually coincides with bad industry news, low analysts' expectations and market fear. In opposite case, high indicator range usually coincides with favorable industry news and high analysts' expectations. For example, on 10/7/2005, 'Major Airlines' industry indicator was 9%. It indicated that fear for the industry was high and expectations were low. DELTA AIR LINES INC filed for bankruptcy protection.
Greed/Fear Indicator is related to bullish bearish stock market sentiments (not directly, but through the stocks price). Sector/industry with high GFI is considered overvalued, and with low GFI - undervalued. Sectors and Industries are ranked according to the indicator value. The lowest rank represents the lowest indicator value. Indicator is useful for industry/sector rotation. For individual stock pick, it is a good practice to consider the GFI and sector/industry rank.
GFI stock technical analysis should be used in conjunction with other stock picking techniques and trading indicators.
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