FGIC has now broken above its –8 level, leaving the extreme fear zone for the first time since mid-February.

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. ]

SBs are very powerful technical signals; they almost always start a rally and very frequently exceed their targets.  In uptrends, the triggering of an SB often signals the end of the pullback, while in a bearish trend, we often observe clusters of SB signals (the three latest signals are marked with vertical S lines) that do not necessarily mark a market bottom.

This is the second occasion when we have verified in real time the backtested data.  FGIC is a lagging indicator: the rise of FGIC from panic levels after an SB signal occurs on average after 2-3 days.  However, when it confirms the SB signal, it helps to distinguish between a short-term rally and a medium-term rally or a reversal of the downtrend.

Have a safe trading week,

Gianluca L.