The CNN Stock Fear & Greed Index is the most popular sentiment gauge for the US stock market, combining seven distinct market indicators into a single 0-100 reading.
How it's calculated
CNN aggregates 7 components: stock price momentum (S&P 500 vs 125-day moving average), stock price strength (new highs vs lows on NYSE), stock price breadth (advancing vs declining volume), put/call ratio, market volatility (VIX), safe haven demand (stocks vs bonds 20-day return), and junk bond demand (yield spread).
How to use it
Warren Buffett's famous quote applies: "Be fearful when others are greedy and greedy when others are fearful." When the index reads Extreme Fear, historically the stock market has often provided good entry points. Extreme Greed has often preceded short-term pullbacks.
What it means for your finances
Use this as a barometer for your investment psychology. If the index says Extreme Greed and you feel compelled to buy more stocks, pause and reconsider. If it says Extreme Fear and you want to sell everything, that's often the worst time. The index helps you check your emotions against the crowd.