Friday’s close triggered yet another weak Spike Bounce signal. They remind me of the effect of a defibrillator on the cardiac rhythm: after a jolt the price re-establishes its bullish rhythm, at least temporarily.

For the past three weeks, the S&P kept reaching its all-time highs, sometimes for several days in a row. In the past, whenever the S&P reached all-time highs, FGIC was always in its positive zone, and frequently in greed readings – but not now.

The two latest Spike Bounce signals were the first in a year to trigger while FGIC was in its negative zone. Market sentiment has deteriorated in recent weeks, even as the S&P kept hitting new highs.

Since the beginning of the year, market sentiment has been steadily declining. In last week’s post we saw that FGIC attempt to rise from its fear level was stopped by its neutral zone – it worked as support last year, but now turned into strong resistance.

Last week’s bullish upswing of FGIC brought this index back to its neutral zone, as improving sentiment drove the S&P to new all-time highs. FGIC neutral zone (between -2 and +2) often marks static congestion areas.

A steep move from greed to fear began in early May and lasted a month. Now FGIC is trying to rise after having lapped the extreme fear readings.

Last week’s bullish attempts by the S&P weren’t supported by the sentiment; on the contrary, FGIC extended its downtrend since the beginning of May and closed the week at —6, only two ticks above the upper boundary of the extreme fear readings.