The oversold condition continues: S&P traced a new low, the Spike signal was confirmed by closing Friday above -4000, the next SB signal is likely to be rated strong. FGIC fell further to -11, the level last reached at the end of the pandemic selloff.  Next week, the triggering of an SB signal accompanied by the rise of FGIC will hopefully join the ongoing Spike signal. The Composite Momentum (CM) is an indicator created by Francesco Caruso, you can find the details along with the formula for some trading platforms here (in Italian, but your browser will translate it easily).  The chart shows the quarterly S&P500 index since 1960.  The changes that…

This week we have a number of bullish signals. These do not necessarily represent the end of the market decline, but they are the first concrete signs of bear market exhaustion. Friday triggered a Spike Bounce signal, rated weak, but more importantly the Spike signal is developing. Although we have not yet seen clear signs of capitulation, the FGIC closed the week at -10, a fear level from which the market in the past has often rallied.  Markets must panic before they recover.  The confluence of multiple technical signals increases the odds in the trader’s favor: a recovery of FGIC in the coming week will add fuel to the powerful…

The S&P plummeted Thursday and Friday, aimed at retesting this year’s lows. The weekly S&P is retesting for the fourth time an important congestion area between 4300 – 4200.  If this support gives way, it’ll be difficult to see another significant support before the 3800 level.  The weekly component of the FGIC has entered the negative zone, marking the third consecutive lower high (see red numbers). The typical reaction rally within a bear market had reached its peak in early April, and since then the S&P has lost almost 400 points.  FGIC has failed in its attempt to break upward from its neutral zone.  It now continues negative, between -4…

The weekly timeframe of the CNN Fear & Greed index is the component of the FGIC that best tracks the medium-term cyclical pattern of fear and greed. In the past, a prompt bullish reaction of the weekly FGI after sinking into extreme fear readings (see green numbers) has often signaled the start of a new bullish leg. After confirming the uptrend triggered by the last Spike Bounce signal (vertical S line), FGIC went sideways staying a at the –4 level for week.  The S&P is now fighting with an important congestion zone: on Friday a V1 was triggered but the S&P closed slightly above the +1 ATR making the signal…

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

As often happens during the deepest corrections, we had a series of Spike Bounce signals: three strong ones in 15 trading days. After the first two SBs, FGIC continued to decline down to -11, a panic level reached in the last two years only at the end of the pandemic selloff.  But after the last SB on Wednesday, FGIC made a tick to the upside: a confirmation signal. If FGIC’s rise continues this week, it will signal if not the end of this correction, at least a prolonged, multiweek rally.

Last week FGIC had an uptick in support of the strong Spike Bounce signal, but it was a short-lived rally. S&P500 tried to recover, bouncing between -1ATR and EMA 21.  On Thursday, after a V2 trigger, it failed to rally out of the value zone, extinguishing the Spike Bounce signal.  FGIC did not confirm that breakout attempt, but fell, closing at a –10 for the week.  A Spike Bounce signal not supported by FGIC often leads to a return to the lows or deeper. All timeframes that make up FGIC are in their negative or extreme fear readings.  On the left, the weekly timeframe, which most closely tracks the medium-term…

On Friday a strong Spike Bounce signal (marked as a vertical dashed “S” line in the chart below) was triggered, after the S&P traced a clear washout of the January lows andclosed above -1ATR, with new lows shrinking from about 2600 to just over 150. Last weekend I wrote: “a clear washout of the January lows could bring FGIC to panic levels for the first time since the beginning of the decline.  Markets have to panic before recovering.  Triggering a Spike Bounce could possibly generate a tradable rally.” On Thursday, FGIC sank to the panic level of -9 and then immediately ticked up, along with a strong Spike Bounce signal. …

Last week the S&P broke several support levels and lost nearly 1.5%. FGIC remained flat, ending the week at its –8 level, at the edge of 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. ] The inset on the left shows the values of the four timeframes from which FGIC is derived: they are all negative and falling.  Next week, a clear washout of the January lows could bring FGIC to panic levels for the first time since the beginning of the…

The strong support level mentioned last week was broken down on Friday with the S&P closing below all supports: SMA 200 (not shown), the 1.5 ATR from the lows and, fractionally, the – 1 ATR. Last Friday’s 1HL setup was also invalidated. 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. ] The last Spike Bounce signal (Strong, marked by a vertical S line), triggered two weeks ago.  While the S&P reached and exceeded Spike Bounce target, FGIC never reacted to the upside and indeed…