This article investigates the predictive power of popular market-based sentiment measures for subsequent returns on the Standard & Poor’s (S&P) 500 futures contract over 10-day, 20-day, and 30-day horizons from January 1989 through June 1999. These measures include the volatility index, the put–call ratio, and the trading index. The empirical results show that these variables over a variety of specifications frequently have statistically and economically significant forecasting power. The results indicate that these variables are contrarian indicators, consistent with the view that periods of extreme fear in the stock market have provided excellent buying opportunities. Finally, out-of-sample trading simulations performed over the second half of the sample period demonstrate that profits and risk-adjusted profits would have been enhanced by buying S&P futures when the fear indicators were high rather than low. © 2001 John Wiley & Sons, Inc. Jrl Fut Mark 21:447–462, 2001