After the bull run in October the markets are taking a break. FGIC, which accompanied that rise, remained at the lower level of extreme greed readings (+8) throughout last week.
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. ]
When FGIC is in the extreme fear readings, the markets are in pain – a pain that can last for months, but often ends with a violent upmove. In healthy bull markets, FGIC tends to stay in its positive zone. Its overruns into the extreme greed readings are not necessarily a sign of impending danger, but rather precede a pullback, as happened repeatedly in recent years.