Last week saw the second strong Spike Bounce (SB) signal in two weeks. During declines, Spike Bounce signals often appear in clusters. FGIC helps differentiate between SB signals that represent a short-lived reaction rally and those that fuel an upside reversal.

Since December, we had three strong SBs which weren’t followed by a FGIC bounce, suggesting that the market bottom had yet to be found.  SBs followed by FGIC rises led to more sustainable rallies.  A rise of FGIC may lag a few days but looking at the right edge we need to see a confirmation of the latest SB this week.

FGIC closed the week at -10, its level of the last two weeks, while S&P500 closed below –1ATR: a sign of weakness.  FGIC entered the extreme fear zone 31 calendar days ago: the average stay over the last six years has been 52 calendar days (range 36-95 days).

Have a safe trading week,

Gianluca L.