FEAR AND GREED INDEX

An index developed and used by CNNMoney to measure the primary emotions that drive investors: fear and greed. The Fear and Greed Index is based on seven indicators:

  1. Stock Price Momentum - as measured by the S&P 500 versus its 125-day moving average
  2. Stock Price Strength - based on the number of stocks hitting 52-week highs versus those hitting 52-week lows on the NYSE
  3. Stock Price Breadth - as measured by trading volumes in rising stocks against declining stocks.
  4. Put and Call Options - based on the Put/Call ratio
  5. Junk Bond Demand - as measured by the spread between yields on investment grade bonds and junk bonds
  6. Market Volatility - as measured by the CBOE Volatility Index or VIX
  7. Safe Haven Demand - based on the difference in returns for stocks versus Treasuries

Each of these seven indicators is measured on a scale from 0 to 100, with 50 denoting a neutral reading, and a higher reading signaling more greed. The index is then computed by taking an equal-weighted average of the seven indicators.