One Wall Street’s indicators of risk appetite shows the tech sell-off has made investors a lot more cautious

• A Wall Street indicator of risk appetite shows investors are lot less confident than they were last week, before the tech sell-off. 
• CNN Money’s “Fear & Greed Index” fell from a reading of “extreme greed” last week, to “neutral”. 
• Tech stocks sold off sharply over the past few days after weeks of solid gains. 
• Most analysts expect stocks to continue to correct lower after having posted record highs just last week, but see no bear market in sight.
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Wall Street bulls have turned a lot more cautious this week, after a three-day sell-off in the stock market led by the technology sector caught a lot of investors by surprise.

CNN Money’s “Fear & Greed Index”, which measures which of these two emotions is driving investors at any given time, has subsided into “neutral” territory for the first time in around two months. 

A reading of between 0 and around 45 reflects “extreme fear” and gradually abates to “fear” and then “neutral”, while a reading above 55 indicates “greed” and becomes “extreme greed” above roughly 75. 

Just a week ago, the index, which is compiled using seven market-based indicators, was at 76, giving an “extreme greed” reading. At the start of 2020, when investor sentiment was buoyant over the prospect of a trade truce between the US and China, this reading was closer to 100, while in March, at the height of the coronavirus crisis, it barely held in single digits.

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The index had been flashing "extreme greed" for well over a month, as benchmark US indices hit record-highs, led predominantly by the technology sector, but also fueled by growing confidence in the resilience of the economy to recover from the pandemic. 

On Wednesday, the S&P 500, and the Dow 30  and the Nasdaq staged a recovery, after three days of losses drove the indices to their lowest in around a month. The tech sector, led by electric vehicle maker Tesla, bore the brunt of the selling earlier in the week, with Apple, Amazon, Microsoft, Google parent Alphabet and Facebook, all sliding. 

A number of prominent market-watchers, including Swiss investment bank UBS and Goldman Sachs, have billed the drop as little more than a healthy correction to a market that had hit record high after record high this year. 

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The S&P 500 closed at an all-time high of 3580.84 on September 2 before the sell-off happened. 

Read more: Fred Stanske uses the insights of Nobel winner Richard Thaler, the 'father of behavioral finance,' to beat the market with under-the-radar stocks. Here's how he does it - and 2 picks he's buying for long-term gains.

Market strategist Jim Bianco told CNBC on Tuesday that the stock market was in the middle of a 10% to 15% correction, the worst since March, and that it may be too early for investors looking for a discount to dive in.

But Milan Cutkovic, market analyst at broker AxiCorp thinks any downward correction in tech stocks is likely to be short-lived, as reflected by the Fear and Greed index's "neutral" reading this week.

"There is currently no panic, and some investors see the latest downturn as a healthy correction after several of the tech giants reached staggering heights. The current sell-off will far more likely end up being a temporary setback rather than the beginning of a trend change," Cutkovic said.