Last Monday the S&P500 entered correction territory having lost more than 10% from its highs but market sentiment, as measured by the FGIC, did not deteriorate to the same extent.
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. ]
Last Friday the S&P was almost 140 points lower than at Christmas, while FGIC was still above its extreme fear readings. The collapse of the S&P created a divergence with FGIC which left its neutral zone only on Wednesday, holding at -4.
We will see whether a Spike Bounce signal will be triggered this week and whether it’ll be confirmed by FGIC.
(This article has been posted on SpikeTrade. Follow FGIC updates on www.spiketrade.com)