The Fear and Greed Index Isn't What You Think
StatsEdgeTrading
Before you put another indicator on your chart, read this.
Everyone keeps quoting the CNN Fear and Greed Index like it’s a window into the investor psyche. It isn’t. Scroll down on CNN’s own page and the “sentiment” gauge is actually seven technical indicators stitched together, S&P vs. its 125-day moving average, 52-week highs minus lows, McClellan summation, put/call ratio, VIX level, safe haven demand, and junk bond demand.
Two things worth sitting with:
It’s not sentiment. It’s a technical composite wearing a sentiment costume. Nothing wrong with that just know what you’re holding.
The 125-day moving average choice is arbitrary. Why not 100? Why not 200? Nobody at CNN is publishing the backtest.
The lesson isn’t “ignore the index.” It’s ignore any indicator you haven’t pressure-tested yourself. Hindenburg Omen, golden cross, RSI(2). Treat all of them with a curious mind, not a reverent one.
Action plan: pick one indicator you currently trust. Pull the historical data. Backtest the rule. If the edge isn’t there, retire it. If it is, size it properly and move on.
Want the work already done across swing, day, and investing systems backtested 25 years? Head to www.statsedgetrading.com.