Fear and Greed Index

The Fear & Greed Index quantifies investor sentiment on a 0–100 scale, where 0 indicates extreme fear and 100 indicates extreme greed. Developed to capture the emotional drivers behind market moves, the index helps investors gauge whether stocks may be under- or overvalued and serves as a sentiment barometer—not a standalone trading signal.

Key takeaways

• Measures investor sentiment by combining seven market indicators into a single score (50 = neutral).
• Scores below 50 indicate fear; above 50 indicate greed.
• Useful for spotting potential turning points, but should be used alongside fundamental and technical research.
• A crypto version (Alternative.me) adapts the concept to digital assets using different inputs.

What the index measures

The index is based on the idea that emotion affects prices: fear can push prices below intrinsic value, while greed can inflate prices above it. CNN Business’s version averages seven equally weighted indicators to produce the daily score.

How the index is calculated — the seven indicators

1. Stock price momentum: S&P 500 relative to its 125-day moving average.
2. Stock price strength: Number of NYSE stocks making 52-week highs versus 52-week lows.
3. Stock price breadth: Trading volume in advancing stocks versus declining stocks.
4. Put and call options: Put volume relative to call volume (more puts = fear; more calls = greed).
5. Junk bond demand: Spread and demand differences between junk (high-yield) bonds and investment-grade debt.
6. Market volatility: CBOE Volatility Index (VIX) based on a 50-day moving average.
7. Safe-haven demand: Relative returns of stocks versus U.S. Treasuries.

Each indicator is scored, then averaged equally to produce the index value.

Historical context and examples

The index has highlighted major market extremes:
* September 2008: Fell to around 12 amid the financial crisis after Lehman Brothers collapsed.
September 2012: Rose above 90 as equities rallied following quantitative easing.
March 12, 2020: Dropped to 2 during the COVID-19 market crash.
* November 2020: Climbed into extreme greed as vaccine hopes improved market outlooks.

These extremes can signal potential reversals or heightened risk, but they are not guarantees.

Fear & Greed in crypto

Alternative.me created a similar index for cryptocurrencies to reflect the sector’s high emotional volatility. Inputs include:
* Price volatility over the past 30 and 90 days
Market volume and momentum
Social media mentions (e.g., X) and sentiment via coin hashtags
Bitcoin market-cap dominance
Google Trends search interest for Bitcoin-related queries

The crypto index provides a sentiment snapshot tailored to digital-asset behavior, which can differ from traditional markets.

How to use the index

• Treat the index as a sentiment overlay, not a primary investment model.
• Use it to complement fundamental analysis, valuation metrics, and risk management.
• Extreme fear can present buying opportunities for long-term investors; extreme greed can signal increased risk and the potential for pullbacks.
• Combine with portfolio goals, time horizon, and diversification plans before making decisions.

Conclusion

The Fear & Greed Index summarizes market psychology into a single, easy-to-read score that can help investors recognize emotional extremes. It is most effective when used alongside other research tools and sound investment discipline. For cryptocurrency sentiment, dedicated indices adapt the same concept using crypto-specific signals.

Primary references

• CNN Business — Fear & Greed Index
• Alternative.me — Crypto Fear & Greed Index