A description of how the market is priced today, in two readings rather than one. Froth needs two things at once — risk being priced cheaply, AND a crowd leaning into it. The check reports both separately, because a single "temperature" number cannot tell a calm market from a terrified one, and we tried.
The first leg is "risk is cheaply priced" — is it cheap to insure against trouble, and are lenders barely being paid to take on default risk? It combines the VIX (the market’s expected volatility) with the high-yield credit spread (the extra yield demanded from risky borrowers). When both are low, risk is on sale.
The second leg is "the crowd is leaning in" — is sentiment greedy, and is participation stretched so that almost everything is already up? It combines the Fear & Greed index with market breadth. Each leg is scored 0-100, and a leg counts as live once it reaches 50.
Because froth is an AND, and one number cannot carry two independent facts. If you multiply the two legs together, the result collapses to nearly zero whenever EITHER leg is near zero — which means a calm, cheaply-priced market that the crowd happens to ignore, and an outright panic with volatility spiking and credit spreads blowing out, both print the same reassuring "not overheated". Identical output, opposite worlds. That is not a subtle flaw; it is the gauge being silent exactly when it matters.
So the legs are shown side by side and the pair is named in English. "Risk is cheaply priced 67/100" next to "Crowd euphoria 0/100" tells you the true thing the single number could not: a calm, cheaply-priced market the crowd does not love.
Both legs live — "cheap risk, and the crowd is leaning in". This is the actual froth combination: risk priced for perfection while everyone is already positioned for it. Frothy markets can stay frothy for a long time, so it is still not a sell signal.
Cheap risk, quiet crowd — "calm and cheaply priced, but the crowd does not love it". An ordinary state, neither bubble nor panic. Greedy crowd, jumpy tape — "the crowd is greedy while risk is being repriced": greed inside a nervous market is not froth, because the calm surface it would need is missing.
Then the two cold readings, which must never share a label. "Stressed" means volatility is bid and credit spreads are wide — risk is anything but cheap, and nobody is greedy. That is stress, not calm. "Neither cheap risk nor a greedy crowd" is the unremarkable middle: an ordinary tape on both readings.
It is not the buying-conditions score inverted, and it is not derived from it. The two answer different questions: buying conditions ask "is this a good moment to buy?", while the froth check asks "if conditions are poor, is it because the market is frothy or because it is weak?" — a question the buying-conditions score structurally cannot answer, since identical arithmetic drives it down in a bubble and in a slow rot alike.
And it is not a timing tool. The honest version of this page has to say that the hot readings did not, historically, hand a buyer a worse year — calm volatility and tight spreads are also what the middle of a long bull market looks like. Use it as context for how much you are being paid to take risk today, not as an instruction to buy or sell.
No. It describes how the market is priced today and asserts no edge on what happens next. On the historical record, markets that looked frothy went on to rise about as often as usual, and frothy markets can stay frothy for years. It is context, never a sell signal.
It should not, and that is exactly why the two legs are reported separately. A crash makes the "cheap risk" leg collapse — volatility spikes, spreads blow out — so any single combined number falls to zero and reads "not overheated", which is technically true and wildly misleading. The pair of legs names it "stressed" instead.
Buying conditions ask whether now is a good moment to buy. The froth check asks WHY conditions are what they are — froth or weakness — using froth inputs only. A market can have poor buying conditions and read completely unfrothy; that pair means "weak internals under a calm surface", which one number alone cannot express.
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Educational research only — not investment advice.