Editor's note: Emotions are at the heart of market movements. And with fear reaching extreme levels, Ten Stock Trader editor Greg Diamond sees an opportunity coming up soon. In today's piece, adapted from his March 3 Weekly Market Outlook, Greg explains why the market could be about to finish its correction... and why it's time to take advantage of today's volatility.

Fear and greed drive investor behavior... And today, extreme fear is entering the market.

These human emotions have been the foundation of CNN's Fear & Greed Index – an investing tool launched in 2012. This index helps us gauge the mood of the market.

Excessive fear tends to push stock prices down... while excessive greed tends to inflate them. And when these emotions hit a fever pitch, they're often contrarian indicators.

The Fear & Greed Index is sitting around 20 right now. That's the kind of "Extreme Fear" reading you usually expect to see during a major drawdown, such as a COVID-like crash.

But while everyone else is panicking, you don't have to. This is setting up a massive contrarian opportunity.

You see, volatility is picking up. We're already noticing several big catalysts coming into play.

And these conditions are all lining up at the same time...

That's a big reason why I want to capitalize on the extreme fear (and market weakness) we're seeing. Today, I'll show you one part of the market where we can see this setup at work...

Stocks have dropped hard in recent weeks. Investors are scared. And several events are coming up that are likely to bring more fear and uncertainty.

A perfect example is the Federal Reserve's next meeting on March 18 and 19. As I often remind my subscribers, the Fed tends to get the big picture wrong most of the time...

From 2020 to 2021, for example, the agency said inflation would be transitory. But that was a big mistake. Furthermore, after the central bank cut interest rates in September 2024, inflation failed to come down.

What if the Fed gets it wrong again?

These types of questions (the "why") are important right now... given the number of catalysts on deck. The key is to see how the bond market and stock market react over the next few months.

What if the bond market signals that the Fed has to start cutting rates? Remember, bonds tend to turn sooner than stocks – so they're high on my radar right now.

If that happens, we'd likely see extreme emotion in the stock market once again. We're already seeing extreme fear, as I said above.

The upcoming Fed meeting is just one of many important catalysts this month...

On March 4, the Trump administration implemented tariffs on Canada and Mexico. That could fuel a short-term high or low in stocks.

We're likely to see more big swings on continued tariff news. And we've already seen threats of an imminent government shutdown tomorrow.

All of this has paved the way for a contrarian trade setup... Simply put, I want to buy the extreme fear and weakness unfolding in stocks.

We're looking at extreme oversold levels in both the short and long term. When stocks are "oversold," it means prices have fallen too fast. It shows investors are panic selling. And that means a quick reversal is likely... setting up buying opportunities in the market.

I think we're likely seeing the completion of the long-term correction in most of the sectors I've been tracking. Today, we'll focus on the technology sector.

I like to use Microsoft (MSFT) to get a sense of how tech is moving. Take a look...

I've been tracking this chart since around June 2024. MSFT simply hasn't rallied... In fact, it dropped this year, well before the rest of the market. It's now trading below the level of its panic low from August.

As you can see, the relative strength index ("RSI") is near oversold levels.

MSFT could bottom out early... before the late-March time factor, marked in red. The blue swing line above illustrates a potential rally into late April.

This March and April time frame is going to be incredibly important going forward – not just in tech, but in several sectors. And it's one reason I'm looking to buy the market weakness.

Now let's shift to the five-year MSFT chart for the long-term view...

Looking at the price low in the fall of 2023, we have a positive RSI reversal... as long as that low isn't broken.

This technical indicator is important. It tells us there's a high probability of a low, which we can definitely trade.

It's also more evidence that the correction we've been following is likely complete.

The big question heading into this March and April time frame is... if I'm right about the correction in stocks, how will bonds react?

Do bonds rally because the Fed begins cutting interest rates and inflation starts coming down? Or do bonds fall while interest rates rise because growth resumes?

These would be the bullish scenarios. The bearish scenarios are that inflation might remain high, punishing stocks further. However, the bullish outcomes are more likely based on my research.

That's a great setup for rallies like the one I expect in tech...

With all the catalysts this month, the market is getting choppy. But that volatility is exactly what should hand us excellent trading opportunities.

Good trading,

Greg Diamond, CMT

Editor's note: Market volatility is hitting investors hard... And that's why Greg is the most excited he has been in years. During Trump's first term, Greg found 17 different ways to double your money in as little as a day. Now, with fear in control of the markets, Greg believes similar conditions could lead to big gains – and the weeks ahead will be critical... See how to take advantage of it here.