The Fear&Greed Composite deepens its divergence from S&P500

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). Continuous and dashed lines represent past “strong” and “medium” Spike Bounce signals, respectively.

The Composite Fear&Greed Index
The Composite Fear&Greed Index

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FGIC lost another two points during the abbreviated last week of the year.  It remains in its positive zone but continued to weaken while the S&P closed at all-time highs.

2020 has been a particular year for this indicator.  It never happened before that a Spike Bounce signal was triggered with FGIC in positive zone.  In 2020 it happened 3 times (marked with small green arrows), the first of which was in February.

Minor past pullbacks ending at -8 level of the Composite Fear&Greed Index
Minor pullbacks ending at -8 level

A deepening of the FGIC does not mean that a major correction is imminent: often a pullback ends when FGIC reaches the upper boundaries of the extreme fear readings (-8) – a level where the probability of a new Spike Bounce signal increases.

(This article has been posted on SpikeTrade. Follow FGIC updates on