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 decline. Markets have to panic before recovering. Triggering a Spike Bounce could possibly generate a tradable rally.
(This article has been posted on SpikeTrade. Follow FGIC updates on www.spiketrade.com)