What is the greedometer?
The greedometer is a strategic investment conditions indicator designed to identify secular extremes i.e., long term US stock market peaks and troughs.
None of the eight parameters contained in the greedometer algorithm are stock market prices. Including them would be intellectually disingenuous i.e., cheating. Clearly, anyone can examine a historical stock market chart, identify the major peaks and troughs, and thereby reach a conclusion those levels are worthy of representing future stock market tops and bottoms.
The greedometer sm is supported by a database of several thousand data points (mostly weekly) beginning in January 1999 and incorporating eight sources of fundamental and technical market and economic data. Four of the eight parameters contained in the greedometer algorithm are very well known:
- CBOE S&P500 VIX volatility indicator.
- ECRI’s weekly leading economic indicator.
- Shiller adjusted P/E ratio on the S&P500 index.
- S&P500 profit margin.
The greedometer sm was conceived to amalgamate an array of indicators regarding the US stock market and economy. The graphical gauge resembles a tachometer commonly found in cars and trucks. Whereas tachometers warn when an engine is likely to self destruct at high rpm, or stall at low rpm, the greeometer borrows from this analogy and identifies periods of extreme greed and fear that accompany secular US stock market tops and bottoms.
NAPFA