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.

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. ]

In the past, FGIC diverging from price has often been a signal that the corrective phase was not over: it is necessary to see a rise in sentiment to support any new bullish attempts.

After the high on Tuesday, S&P500 drew two inside bars, broke out to a new high of the week on Friday but reversed, creating a false breakout and failing to close above +1ATR (see inset) – a level that must be reached and maintained as repeatedly signaled by Kerry.

Have a safe trading week,

Gianluca L.