Greed Turns Extreme: What QHI Signals Now

Quantlake Herd Index™ (QHI): 80.7 / 100 — Extreme Greed  

Close of Thursday, August 14

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The U.S. market sentiment composite index climbed 1.4 points from the prior day, reaching its highest level since February 25. This marks the most elevated sentiment in nearly six months and reflects a fresh transition from Greed to Extreme Greed — the first such move in 205 days.

Momentum is clear. The current nine-day up streak is longer than 72% of all historical runs, indicating a sustained run of optimism. QHI now stands +3.9% above its one-week average, +19.4% above its one-month average, and +104% above its six-month average — levels that confirm sentiment is not only elevated but accelerating.

New highs are evident across multiple timeframes: the index has set new one-week, one-month, and three-month highs, with gains extending well above both short- and long-term norms. The one-month standard deviation of 7.4, nearly identical to the historical average of 7.5, shows that the move is not driven by unusual volatility but by steady upward pressure.

Historically, Extreme Greed has averaged a -0.36% return over the next month compared to the SPY baseline of +1.23%, and +1.39% over three months versus SPY’s +3.65%. This suggests that while gains are possible, they have often lagged the broader market following similar sentiment peaks.

Duration patterns provide further perspective. Extreme Greed phases have lasted from a single day to as long as 89 trading days, with an average of 20.5 days. The current reading marks only the first day of this stint, leaving the potential duration wide open.

The current z-score of 1.16 places QHI more than one standard deviation above its historical mean, underscoring its position at the high end of the distribution.

In summary, sentiment has accelerated to its highest in nearly half a year, powered by a nine-day streak of gains and readings well above both short- and long-term averages. Historically, such elevated optimism has been followed by periods of underperformance relative to SPY, aligning with past market phases where enthusiasm was stretched without extreme volatility.

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Happy Long-Term Investing!

Romain Gandon, CEO & Founder of Quantlake
🔗 LinkedIn

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