Contrarian buy signal. Equity sentiment depressed but credit markets disagree. Historically the strongest mean-reversion setup. Increase equity allocation, overweight high-beta.
Fear + Credit Weak (Junk < 40)
Broad risk-off confirmed across equity and credit. Defensive posture warranted. Raise cash, add hedges, rotate to quality. Wait for credit stabilization before re-entry.
Greed + Credit Strong (Junk > 60)
Consensus risk-on. Trend intact but complacency risk rising. Maintain exposure but tighten stops. Begin taking partial profits on momentum positions.
Greed + Credit Weak (Junk < 40)
Divergence warning. Equity euphoria without credit confirmation is fragile. Highest probability of sharp correction. Reduce gross exposure, buy downside protection.
Overview
The Fear & Greed Index compresses six market dimensions into a
single 0–100 composite score. Each component is independently
z-score normalized against its own rolling history, then mapped to the
0–100 scale. The composite is an equal-weighted average of all six.
Components
Momentum — S&P 500 distance from its 125-day moving average. Measures trend persistence and stretch from mean.
SafeHaven — Relative performance of treasuries vs equities. High demand for safe assets signals fear.
VIX — Implied volatility of S&P 500 options. Inverted: high VIX = low score (fear). Captures options market pricing of tail risk.
Strength — Ratio of stocks making 52-week highs vs lows. Measures breadth of conviction across the market.
Breadth — Advance-decline volume ratio. Captures whether volume is flowing into advancing or declining issues.
Junk — Spread between junk bond yields and investment-grade yields. Tight spreads signal credit appetite (greed); wide spreads signal fear.
Strengths
Multi-dimensional: captures equity, credit, volatility, and flow signals
Lagging in fast-crash environments (2020 COVID, 2008 Lehman)
Greed regimes can persist far longer than contrarian models expect
No sector-level granularity
Z-score normalization window affects sensitivity
How to Read This Analysis
Start with the gauge.
The half-circle gauge gives an immediate read on aggregate sentiment.
The needle position and color band tell you the current regime:
Extreme Fear (0–25), Fear (25–40), Neutral (40–60),
Greed (60–75), Extreme Greed (75–100).
Check the radar for imbalance.
A symmetric hexagon means all components agree. A lopsided shape
reveals divergence. When Junk is high but VIX is low, credit and
volatility are telling different stories — that is actionable.
Use the historical chart for context.
Current score means little without history. Switch between 30d (recent),
1Y (cyclical), and All (structural) timeframes. Color bands mark the
regime zones. Look for how long the index spent in extremes before
reverting.
Read the heatmap for component momentum.
The last 30 days, color-coded by score intensity. Identify which
components are deteriorating (fading green) or recovering (deepening red
turning amber). Transitions matter more than levels.
Cross-reference the action framework.
The 2×2 matrix crosses Fear/Greed with Junk (credit confirmation).
The highlighted cell is your current regime. It tells you what the
historical playbook suggests.
where $x_{i,t}$ is the raw value of component $i$ at time $t$, and $\mu_{i,N}$, $\sigma_{i,N}$ are the rolling mean and standard deviation over an $N$-day lookback window.
Score Mapping (CDF Transform)
$$S_{i,t} = 100 \times \Phi(z_{i,t})$$
where $\Phi$ is the standard normal CDF. This maps any z-score to the 0–100 range with natural compression at the tails.
Composite Score (Equal-Weighted)
$$C_t = \frac{1}{K}\sum_{i=1}^{K} S_{i,t}$$
where $K = 6$ components. The equal-weight design prevents any single signal from dominating the composite.