How to Read the Sentiment Indicators
The Trifecta Market Watch uses two complementary sentiment tools — the CNN Fear & Greed Index and the VIX (CBOE Volatility Index) — to give you a real-time read on market psychology. Neither is a buy or sell signal on its own, but together they help you understand whether the market is acting rationally or emotionally.
CNN Fear & Greed Index (0 – 100)
Developed by CNN Business, this index aggregates seven market signals into a single daily score: stock price momentum (S&P 500 vs. its 125-day average), market breadth (advancing vs. declining stocks), put/call ratios (hedging activity), junk bond demand (risk appetite), safe-haven flows (stocks vs. bonds), market volatility (VIX), and options pricing skew. A score of 0 represents maximum fear; 100 represents maximum greed.
The context row below the gauge (Prev Close / 1 Week / 1 Month / 1 Year) is as important as the current score. A score of 35 that is rising from 28 last week tells a very different story from a score of 35 that has fallen from 55 last month.
Markets are oversold. Historically a potential accumulation zone for long-term buyers.
Caution prevails. Sellers are in control but the move may be losing momentum.
No strong directional bias. Markets are digesting recent moves.
Buyers are in control. Risk appetite is elevated — watch for signs of overextension.
Markets are stretched. Elevated correction risk. Contrarian caution warranted.
VIX — CBOE Volatility Index
Often called Wall Street's fear gauge, the VIX measures the market's expectation of 30-day S&P 500 volatility, derived from the pricing of near-term options contracts. It does not predict direction — it measures the speed and size of expected price swings. A rising VIX means options traders are paying more for protection, which typically reflects growing anxiety. A falling VIX means calm is returning and hedging costs are dropping.
The VIX and the Fear & Greed Index usually move together. When they diverge — for example, the VIX is spiking while the Fear & Greed Index holds steady — it is a warning sign that institutional players are hedging more aggressively than the broader sentiment picture suggests.
Low volatility. Markets are complacent. Risk assets typically perform well.
Uncertainty is rising. Institutional hedging is increasing. Proceed with awareness.
Genuine market stress. Panic or forced selling may be underway. Volatility spikes often mark short-term bottoms.