How the market's emotional temperature has shifted over time — and what it meant for what came next.
Historically, readings below 25 have preceded mean-reversion bounces within 5-10 trading days. Extreme fear often reflects peak pessimism — not peak risk. Contrarian positioning during extreme fear has rewarded patient capital more often than not.
Readings above 75 signal complacency and elevated drawdown risk. Markets can stay greedy longer than expected, but the probability of a 3-5% pullback within 10 days rises significantly. Greed does not mean sell — but it does mean tighten risk parameters.