The Fear & Greed Index, Explained

What the index measures

A fear & greed index aggregates several independent market measurements into one sentiment score, where 0 is maximum fear and 100 is maximum greed. The best-known version (popularized by CNN Business) blends seven inputs; most serious implementations, including the gauge Assets Bulletin computes daily, use a similar recipe:

• Price momentum — the index versus its recent moving average.
• Price strength — stocks making new 52-week highs versus new lows.
• Price breadth — advancing versus declining volume.
• Put/call ratios — how heavily traders are buying protection.
• Volatility — the VIX relative to its own recent range.
• Safe-haven demand — stock returns versus bond returns.
• Junk bond appetite — the yield spread investors accept for risky credit.

What extreme readings historically mean

Sentiment gauges earn their keep at the extremes. Readings in extreme fear (roughly below 20) have historically clustered near durable market lows — March 2009, December 2018, March 2020 — because panic selling exhausts itself. Readings in extreme greed (above 80) mark environments where risk is being ignored, though they are notoriously poor timing tools: markets can stay greedy for months.

The asymmetry matters. Extreme fear tends to resolve upward within weeks; extreme greed can persist. That is why practitioners treat fear extremes as opportunity scans and greed extremes as risk-management prompts rather than sell signals.

How to use it without fighting the trend

The classic mistake is pure contrarianism — selling because the index is greedy while the market grinds higher for another quarter. The more robust use is conditional: read sentiment inside the prevailing market regime. Extreme fear during an intact bull regime has historically been among the strongest buy-the-dip contexts. Extreme greed during a deteriorating regime, with defensive sectors leading, is when protection is cheapest relative to its value.

In other words: sentiment tells you how crowded the boat is; regime tells you which way the current flows. You want both.

How Assets Bulletin applies it

We compute a fear & greed gauge every trading day and publish it free on our home page and market snapshot, alongside the regime classification and sector rotation board it should always be read with.