The Best Market Indicator Ever
The best indicator of the markets tells us that a stock crash is near
We live in the information age and this is reflected in the amount of data we have on a daily basis. This is causing that on many occasions we lose focus of what is really important and very complex estimates are made with high overfitting.
It has been shown that the more complex a system is, the worse its performance tends to be and that it is often much simpler to use a single ratio and leave aside the noise of the markets, as we show in this article.
One of the most famous indicators that best reflects market sentiment has historically been the ‘Fear & Greed Index’ published by CNN and updated daily. This indicator gives an estimate of how the market is doing in a value between 0–100. With 0 being an absolute fear on the part of investors.