Yuka Finance — technical definition and contrarian reading
Market sentiment is a composite index measuring investors' dominant
short-term emotional state, expressed on a scale from extreme fear to
extreme greed, aggregating price momentum, the put/call ratio, safe-haven
demand, and credit spreads.
How Is Market Sentiment Calculated?
Price momentum — how far indices trade from their moving averages.
Put/call ratio — put vs. call options volume.
Safe-haven demand — relative behavior of gold and bonds.
Credit spreads — yield gap between risky and government debt.
How Do You Interpret Extreme Sentiment?
Level
Interpretation
Contrarian Reading
Extreme fear
Sellers largely exhausted
Higher bounce probability
Extreme greed
Few new potential buyers
Higher correction vulnerability
Concrete example: extreme fear sentiment combined with COT positioning already
near its bearish extreme sees meaningfully improved odds of a technical bounce compared to an
isolated sentiment signal.
On the Yuka Finance cockpit, the sentiment index is calculated and updated
continuously.
Frequently Asked Questions
Is market sentiment reliable on its own?
No. It's a probabilistic context indicator best combined with other structural signals like COT or the gamma regime.
Can sentiment stay extreme for a long time?
Yes, particularly during strongly established trends, where the emotional extreme can persist for weeks before a reversal.
What's the difference between sentiment and the VIX?
The VIX specifically measures options implied volatility; market sentiment aggregates several signals (including the VIX) for a broader psychological reading.
Track sentiment in real time
Yuka Finance calculates the market sentiment index continuously, for free.