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