Investors can gain valuable insights by monitoring the Market Momentum Indicator (MMI) levels, which indicate the sentiment of fear and greed within the market. When the MMI shows a low extreme fear level, typically below 20, it signals an opportunity to open new positions as the market may be oversold and likely to trend upwards. However, the decision to act is dependent on the trajectory of the MMI, with a drop from Greed to Fear suggesting increasing fear in the market and the need for patience until it reaches Extreme Fear for a potential market upturn.
Conversely, if the MMI is transitioning from Extreme Fear, indicating a reduction in fear, it may present a favorable time to consider opening new positions, though careful analysis is still necessary. When the MMI shows high extreme greed, typically above 80, it is a warning sign for investors to refrain from entering new positions as the market is likely overbought and could trend downwards. Monitoring the MMI trajectory from Extreme Greed to lower levels indicates decreasing greed, but it advises investors to exercise patience before seeking new investment opportunities. Furthermore, as the MMI moves from Neutral towards the Greed zone, signifying an increase in greed, investors are advised to be cautious and avoid hasty decisions regarding opening new positions.