Fear & Greed Index
A composite sentiment indicator, published by CNN Business for equities and Alternative.me for crypto, that scores market sentiment from 0 (Extreme Fear) to 100 (Extreme Greed) using multiple data inputs.
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What Is the Fear & Greed Index?
The Fear & Greed Index is a composite sentiment gauge that distills multiple market signals into a single 0-100 score, providing an at-a-glance reading of whether markets are driven by fear (pessimism, risk aversion) or greed (optimism, risk-seeking). The two most widely followed versions are the CNN Business Fear & Greed Index (equity markets) and Alternative.me's Crypto Fear & Greed Index (Bitcoin/crypto).
The index embodies Warren Buffett's famous advice: "Be fearful when others are greedy, and greedy when others are fearful." At its core, it is a contrarian indicator, extreme readings suggest the crowd has over-positioned in one direction, creating the conditions for a reversal.
Score Interpretation
| Score | Label | Market Condition | Historical Implication |
|---|---|---|---|
| 0-15 | Extreme Fear | Panic selling, capitulation | Strongest buy signal (~90% positive 6mo returns) |
| 16-25 | Extreme Fear | Heavy pessimism, elevated hedging | Buy signal (but may persist in bear markets) |
| 26-45 | Fear | Below-average sentiment | Mildly bullish contrarian lean |
| 46-55 | Neutral | Balanced, no strong signal | No directional edge |
| 56-75 | Greed | Above-average optimism | Caution; reduce position sizes at upper end |
| 76-90 | Extreme Greed | Speculative exuberance | Tighten stops; reduce exposure |
| 91-100 | Extreme Greed | Maximum euphoria | Strongest caution signal; correction risk elevated |
CNN Business Fear & Greed Index: Deep Dive
The Seven Components
Each component is scored 0-100 and equally weighted to produce the composite:
| Component | What It Measures | Fear Signal | Greed Signal |
|---|---|---|---|
| Market Momentum | S&P 500 vs 125-day MA | S&P well below MA | S&P well above MA |
| Stock Price Strength | NYSE 52-week highs vs lows | More new lows than highs | More new highs than lows |
| Stock Price Breadth | McClellan Volume Summation | Declining volume dominates | Advancing volume dominates |
| Put/Call Ratio | CBOE equity PCR | High PCR (heavy put buying) | Low PCR (heavy call buying) |
| Junk Bond Demand | HY-IG credit spread | Wide spreads (risk aversion) | Tight spreads (risk appetite) |
| Market Volatility | VIX vs 50-day average | VIX elevated vs average | VIX below average |
| Safe Haven Demand | 20-day stock vs bond returns | Bonds outperforming stocks | Stocks outperforming bonds |
Why these 7 inputs work together: Each captures a different facet of market psychology. Momentum and breadth capture price action. Put/call and VIX capture options market positioning. Junk bond demand captures credit market stress. Safe haven demand captures cross-asset rotation. When all seven align in the same direction, it creates a powerful signal because fear (or greed) is manifesting simultaneously across equities, options, credit, and fixed income.
Historical Extreme Readings
| Date | Score | Context | S&P 500 Next 6 Months |
|---|---|---|---|
| Mar 12, 2020 | 2 | COVID crash, index floor | +45% |
| Oct 13, 2022 | 6 | CPI peak, rate hike fears | +22% |
| Mar 9, 2009 | 12 | GFC bottom (S&P at 666) | +40% |
| Aug 5, 2024 | 14 | Japan carry trade unwind | +15% (3 months) |
| Dec 24, 2018 | 5 | Powell "whatever it takes" | +25% |
| Jan 2, 2020 | 97 | Pre-COVID euphoria | -34% (3 months) |
| Nov 8, 2021 | 84 | Post-COVID bubble peak | -25% (10 months) |
| Feb 1, 2018 | 89 | Pre-Volmageddon | -10% (1 month) |
Crypto Fear & Greed Index (Alternative.me)
Different Inputs for a Different Market
| Component | Weight | Source | Rationale |
|---|---|---|---|
| Volatility | 25% | BTC price swings vs 30/90-day avg | High vol = fear in crypto |
| Market Momentum/Volume | 25% | BTC price vs MAs + volume trends | Declining momentum = fear |
| Social Media | 15% | Twitter/Reddit mentions, engagement | Social buzz correlates with retail mania |
| Surveys | 15% | StrawPoll weekly surveys | Direct sentiment measurement |
| Bitcoin Dominance | 10% | BTC.D | Rising dominance = flight to safety (fear) |
| Google Trends | 10% | Search volume for "Bitcoin," "crypto" | Spikes during mania and panic |
Why crypto needs different inputs: Crypto markets are more retail-driven, more social-media-influenced, and more narrative-driven than equity markets. Including social media and search trends captures the retail mania dynamics (meme coins, influencer pumps, "number go up" culture) that are less relevant in institutional equity markets.
Crypto F&G Historical Extremes
| Date | Score | BTC Price | Context | BTC 3-Month Return |
|---|---|---|---|---|
| Nov 2022 | 6 | $16,500 | FTX collapse capitulation | +50% |
| Jun 2022 | 7 | $18,000 | 3AC/Celsius cascade | +10% (sideways) |
| Mar 2020 | 8 | $5,000 | COVID crash | +180% |
| Jan 2024 | 92 | $48,000 | ETF approval euphoria | +52% (to $73K) |
| Nov 2021 | 84 | $67,000 | Cycle top approaching | -77% (12 months) |
| Apr 2021 | 78 | $63,000 | DOGE/meme mania peak | -55% (2 months) |
Notable observation: the crypto index can reach Extreme Greed and the market can still rally significantly (January 2024), and Extreme Fear can persist for months during structural bear markets (2022). The signal is probabilistic, not deterministic.
Building a Sentiment Dashboard
The Fear & Greed Index is one piece of a comprehensive sentiment framework:
Multi-Indicator Confirmation
| Indicator | Extreme Fear Signal | Extreme Greed Signal | Data Source |
|---|---|---|---|
| CNN F&G | < 15 | > 85 | CNN Business (real-time) |
| CBOE PCR (5-day avg) | > 1.00 | < 0.65 | CBOE (daily) |
| VIX | > 35 | < 13 | CBOE (real-time) |
| AAII Survey (bears) | > 50% | < 20% | AAII (weekly, Thursdays) |
| ICI Fund Flows | Equity outflows > $10B/week | Equity inflows > $10B/week | ICI (weekly) |
| HY Spreads | > 600bps | < 300bps | ICE BofA (daily) |
| Crypto F&G | < 10 | > 90 | Alternative.me (daily) |
| BTC Funding Rate | Negative for 3+ days | > 0.05% per 8h for 3+ days | Coinglass (real-time) |
Signal Strength Framework
| Indicators at Extreme | Signal Strength | Historical Win Rate | Action |
|---|---|---|---|
| 1 of 8 | Weak | ~60% | Monitor; no position change |
| 2-3 of 8 | Moderate | ~70% | Begin scaling into/out of positions |
| 4-5 of 8 | Strong | ~80% | Significant position adjustment |
| 6+ of 8 | Maximum | ~90%+ | Full contrarian repositioning |
In March 2020 (COVID bottom), all 8 indicators simultaneously reached fear extremes, a once-per-decade signal that preceded one of the most powerful rallies in market history.
Limitations and Pitfalls
The Persistence Problem
The single biggest mistake traders make with the Fear & Greed Index is treating extreme readings as immediate entry/exit signals:
- Extreme Greed can persist: The CNN index spent >60% of 2023 above 60 while the S&P rallied 25%. Selling at the first Extreme Greed reading in June 2023 meant missing months of gains.
- Extreme Fear can deepen: During the 2008 GFC, the index was in Extreme Fear for months. The S&P fell another 25% after the first Extreme Fear reading in September 2008. The actual bottom was March 2009.
- Crypto persistence: The crypto F&G was below 25 for 10 consecutive months in 2022. Early contrarian buyers endured significant further losses.
The Correct Framework
Use the Fear & Greed Index as a risk-sizing tool, not a timing tool:
| F&G Reading | Position Size Adjustment | Stop Width | Hedge Level |
|---|---|---|---|
| Extreme Fear (< 15) | Increase to 100-120% of normal | Wider (expect volatility) | Remove hedges |
| Fear (15-40) | 80-100% of normal | Normal to slightly wider | Light hedges |
| Neutral (40-60) | 80-100% of normal | Normal | Normal hedges |
| Greed (60-85) | 60-80% of normal | Tighter | Increase hedges |
| Extreme Greed (> 85) | 40-60% of normal | Tight trailing stops | Maximum hedges |
What to Watch
- CNN F&G level, check daily at money.cnn.com/data/fear-and-greed; focus only on readings below 20 or above 80
- Crypto F&G level, check at alternative.me/crypto/fear-and-greed-index/; focus on readings below 15 or above 85
- Divergence between equity and crypto F&G, when equity F&G is neutral but crypto F&G is in Extreme Fear (or vice versa), the markets are pricing different narratives, creating potential opportunities
- Rate of change, a rapid drop from 70 to 20 in one week is a more powerful signal than a slow drift from 50 to 20 over two months
- Multi-indicator confirmation, never trade on Fear & Greed alone; require at least 2-3 confirming indicators before making significant position changes
Frequently Asked Questions
▶How reliable is the Fear & Greed Index as a trading signal?
▶What is the difference between the CNN and crypto Fear & Greed indices?
▶How should I combine the Fear & Greed Index with other indicators?
▶Can the Fear & Greed Index stay extreme for extended periods?
▶What were the most extreme Fear & Greed readings in history and what happened after?
Fear & Greed Index is one of the signals monitored daily in the AI-driven macro analysis on Convex Trading. The platform synthesises data across monetary policy, credit, sentiment, and on-chain metrics to generate actionable trade recommendations. Create a free account to build your own signal layer and see how Fear & Greed Index is influencing current positions.
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