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Fear and Greed Index

PLAIN-ENGLISH DEFINITION

The Fear and Greed Index is a composite sentiment indicator, published daily by CNN Business, that scores broad-market investor psychology on a scale of 0 to 100. A reading of 0 signals extreme fear; 100 signals extreme greed; 50 is neutral. The index aggregates seven equally-weighted sub-indicators that span price momentum, volatility, breadth, options positioning, and credit spreads to produce a single number designed to summarize whether the equity market is in panic or euphoria.

HOW IT IS CALCULATED

Each of the seven inputs is normalized to a 0–100 score and averaged. The seven components:

  1. Market Momentum — S&P 500 versus its 125-day moving average.
  2. Stock Price Strength — net 52-week highs minus 52-week lows on NYSE.
  3. Stock Price Breadth — McClellan Volume Summation Index of advancing vs declining volume.
  4. Put/Call Ratio — 5-day average CBOE equity put/call ratio.
  5. Market Volatility — VIX versus its 50-day moving average.
  6. Safe Haven Demand — 20-day return difference between stocks (S&P 500) and Treasury bonds.
  7. Junk Bond Demand — yield spread between high-yield and investment-grade corporate bonds.

Composite = arithmetic mean of the seven scores. The published score is bucketed: 0–24 Extreme Fear, 25–44 Fear, 45–55 Neutral, 56–75 Greed, 76–100 Extreme Greed.

WORKED EXAMPLE

A 2026-05-12 reading constructed from public inputs:

Component Reading Score
Momentum: SPY 7% above 125-day MA Greed 78
52-week highs vs lows: 145 vs 28 on NYSE Greed 72
McClellan Volume Summation: +3,200 Greed 68
Put/Call ratio (5-day): 0.65 Greed 60
VIX 14 vs 50-day MA of 17 Greed 70
Stocks +4.2% vs bonds -0.8% (20d) Greed 75
HY spread 280 bp vs IG Neutral 50
Composite Greed ~67

The index reads in greed territory — historically a regime where forward 30-day returns are below average and drawdown risk is elevated.

WHEN TRADERS USE IT

The Fear and Greed Index is a contrarian timing tool. Readings below 25 (extreme fear) have coincided with the March 2020 COVID low, the December 2018 Fed-pivot low, and the October 2022 CPI low — each a medium-term equity bottom. Readings above 75 (extreme greed) have preceded the February 2020, July 2023, and January 2022 pullbacks. Portfolio managers reduce gross exposure on extreme-greed prints and add risk on extreme-fear prints, typically scaling positions over multiple sessions rather than reversing in one day.

LIMITATIONS AND MISCONCEPTIONS

The index is a coincident-to-lagging measure, not a forecast. It tells you where sentiment is right now, not where price goes next. Components are equally weighted regardless of regime — during a credit crisis the junk bond component carries more signal than during an equity-only correction, but the formula ignores this. The index is also a US-equity construct; it says nothing about commodities, rates, or non-US equities. Finally, "extreme" readings can persist for months in a strong trend — the index hit extreme greed in January 2017 and stayed there for most of the year as the S&P 500 rallied another 18%.