Market breadth indicators have been giving very different messages from price analysis for quite some time. FGIC has been declining since the beginning of May, even though the S&P has rallied over 8% since then.
The bars on the chart are colored red when FGIC is -8 or lower (Extreme Fear) and green when FGIC is +8 or higher (Extreme Greed). [ Please follow these links: original and update explanations how FGIC works. ]
FGIC has met resistance in its neutral zone and returned to the edge of its extreme fear readings. Will market sentiment continue to worsen or form a double bottom and rally? In the latter case, the Friday’s close of the S&P below -1ATR must turn into a false bearish breakout in the very first days of the coming week.
The prolonged divergence between the market sentiment and the S&P is even more evident when viewing the individual timeframes that make up FGIC. All are in their negative zones, having never reached their pre-pandemic highs.
Have a safe trading week,
Gianluca L.
2 Comments
Ernie V.
Hi Gianluca. Having followed your posts since you began this journey, I continue to be impressed with the insight you provide via this tool. As I struggle to reduce the number of voices I listen to, I have your posts at the top of my list of info sources. While I do not use your work as a timing tool, the results are excellent for confirmation of the bigger picture. Great work. Please keep it up!
Gianluca L.
Ernst thank you for your kind words. FGIC actually should not be used as a timing tool, however, in the past, there have been quite frequent associations between FGIC and NH-NL indicating the end of a correction or bear market. Conditions that we have not yet had the opportunity to verify in live trading but that will certainly be repeated.