FGIC’s inability to rise from its extreme fear zone, where it spent nearly seven weeks, was a warning signal, in contrast to the powerful bullish signals of recent weeks.

FGIC added two points but remained in its extreme fear zone (-9).

There have been four Spike signals (marked here by vertical dashed lines) since we began following FGIC in 2015; not many, but we know that the Spike is a rare signal that occurs only in extremely oversold markets.

Notice two different patterns: in the 2018 and 2020 Spike signals, FGIC abandoned extreme fear readings in a matter of days while in the current signal, despite the significant 300-point S&P rally that followed, FGIC has not even managed to reach its negative zone, stopping at -9.  This is similar to what happened in the 2016 Spike signal (signal 1) where FGIC did not immediately leave its fear zone after the Spike.  There the market traced a double bottom, with a bullish divergence of weekly NHNL before the final upside reversal.

Have a safe trading week,

Gianluca L.