I have seen some evidence over the last few days suggesting a bounce is likely. But it hasn’t been overwhelming and there is one thing that has been notably absent – a rise in the CBI. The Quantifiable Edges Capitulative Breadth Indicator (CBI) measures capitualtive selling among S&P 100 stocks. I have written many posts on it over the years, which can be found using the CBI label on the right hand side of the blog. The next paragraph is a brief overview for those that are unfamiliar.
To construct the CBI I simply count the number of active triggers among S&P 100 stocks for my Catapult system. The Catapult System was designed to identify stocks that are undergoing capitualtive selling and are likely to see a strong reversal. When a broad number of stocks are undergoing capitulative selling it suggests the market as a whole is undergoing capitulation and the likelihood of a market reversal becomes stronger. I have generally looked for a CBI of 10 or greater to signify a strong likelihood of a bounce.
Of course there are many successful pullbacks that never see a spike in the CBI. But when selling gets intense I prefer to have CBI confirmation before aggressively allocating. As of now, it appears the CBI would only go from 0 to 1 even with the additional 1%+ selloff the market is enduring today. Again, there is some evidence suggesting a bounce right now, but the CBI is unusually weak. I will be sure to alert readers if we do get a spike in the coming days.
More information on the Catapult System and the CBI can be found in the following places:
And of course, all Catapult signals and CBI tracking are inclusive in Quantifiable Edges Gold Subscriptions and have been since the subscription began in 2008.