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Nick Chiu
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Senior Options Trading Strategist at Optionity, MBA. Our trading approach starts with the fundamentals, then through short-term technical analysis, to finally leverage options trading (with the combination of long and short positions) to achieve favorable risk and reward ratio trading plays. Our... More
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  • What Is The Fear & Greed Index? 2 comments
    Dec 20, 2012 7:52 PM | about stocks: SPY, VXX

    Our popular indicator to find out market's sentiment is CNNMoney's Fear & Greed index. The Fear & Greed index is composed of 7 indicators:

    • Stock Price Momentum: S&P 500 versus its 125-day MA
    • Stock Price Strength: the number of stocks hitting 52-week highs and lows on NYSE
    • Stock Price Breadth: the volume of rising stock volume versus declining volume
    • Put and Call Options: the put/call ratio
    • Junk Bond Demand: the spread between yields on investment grade bonds and junk bonds
    • Market Volatility: the VIX
    • Safe Haven Demand: the difference in returns for stocks versus Treasuries

    The index is scaled from 0-100, where the higher reading indicating more greed and 50 is neutral.

    Detail explanation can be reviewed here at CNNMoney.

    The latest number on Fear & Greed Index can be read here.

    Stocks: SPY, VXX
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Comments (2)
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  • Vanmorris
    , contributor
    Comments (5) | Send Message
    Has anyone ever done a correlation study to see how predictive this index is?
    17 Nov 2013, 11:15 AM Reply Like
  • Nick Chiu
    , contributor
    Comments (677) | Send Message
    Author’s reply » That would be interesting to find out. Based on my observation so far, it is a good time to step aside/take a pause for bulls when the market gets to extreme greed, eg. over 70.
    18 Nov 2013, 08:07 PM Reply Like
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