The Fear & Greed Index is a widely used sentiment tool that helps traders and investors measure the emotional state of the stock market. But to fully utilize its power, it’s important to understand what’s behind the score. In this guide, we’ll break down the seven core components of the index and explain how each one contributes to detecting fear or greed in the market.
What Is the Fear & Greed Index?
Created by CNN Business, the Fear & Greed Index scores the market from 0 (Extreme Fear) to 100 (Extreme Greed). It’s updated daily and serves as a sentiment gauge for investors. The score is calculated based on seven market indicators, each measuring a different aspect of investor behavior.
The 7 Components of the Fear & Greed Index
1. Stock Price Momentum
What It Measures:
How far the S&P 500 is trading above or below its 125-day moving average.
Fear Signal: Index below the average → bearish momentum
Greed Signal: Index well above the average → bullish momentum, possibly overextended
2. Stock Price Strength
What It Measures:
The number of stocks hitting 52-week highs vs. lows on the NYSE.
Fear Signal: More 52-week lows than highs
Greed Signal: More 52-week highs than lows
This component shows broad participation in either buying or selling.
3. Stock Price Breadth
What It Measures:
The volume of stocks advancing vs. declining.
Fear Signal: Weak market breadth with more declining stocks
Greed Signal: Strong breadth with more advancing stocks
It reflects the underlying strength or weakness of market trends.
4. Put/Call Ratio
What It Measures:
The ratio of bearish put options to bullish call options.
Fear Signal: High ratio = more puts = defensive behavior
Greed Signal: Low ratio = more calls = speculative behavior
Options activity is a direct measure of trader expectations.
5. Market Volatility (VIX)
What It Measures:
The CBOE Volatility Index (VIX), often called the “Fear Index.”
Fear Signal: High VIX levels = market expecting turbulence
Greed Signal: Low VIX levels = complacency or low fear
It’s a real-time measure of expected short-term market volatility.
6. Safe Haven Demand
What It Measures:
The performance of stocks vs. U.S. Treasury bonds.
Fear Signal: Bonds outperform stocks → investors seek safety
Greed Signal: Stocks outperform bonds → investors take risk
This shows risk appetite in asset allocation.
7. Junk Bond Demand
What It Measures:
The yield spread between junk bonds and investment-grade bonds.
Fear Signal: Wider spread → investors demand higher returns for risk
Greed Signal: Narrower spread → investors willing to take on risk
It reflects confidence in high-risk, low-grade debt markets.
How the Final Score Is Calculated
Each of the seven indicators is scored on a scale from 0 to 100. The average of these scores determines the final Fear & Greed Index value:
- 0–24: Extreme Fear
- 25–49: Fear
- 50: Neutral
- 51–74: Greed
- 75–100: Extreme Greed
Why Knowing the Components Matters
Understanding each factor allows you to:
- Spot which parts of the market are driving sentiment
- Confirm signals from your technical or fundamental analysis
- Make smarter trading and investing decisions based on behavior, not headlines
FAQs
Which component is the most important?
No single component dominates the index. All seven work together to offer a complete view of sentiment.
How often do these components update?
Most update daily, though some (like breadth and strength) respond in real time during trading hours.
Can I track these indicators separately?
Yes. Platforms like TradingView and Finviz let you monitor momentum, VIX, put/call ratios, and more individually.
Do these apply to crypto as well?
Not directly. For crypto, use a separate sentiment tool like the Crypto Fear & Greed Index.
Does CNN publish the raw scores of each component?
Yes, the CNN Fear & Greed Index page shows each component’s current reading and trend.