Notable about Friday’s action is that the Quantifiable Edges Capitulative Breadth Indicator (CBI) rose to 10. I have generally viewed 10+ as strongly bullish over the years. The chart below shows SPX in the top pane and the CBI in the bottom pane. Whenever the CBI reached 10 or higher initially during a spike, I have marked that with a vertical line on the chart.

As you can see, over the last 3 years, CBIs of 10+ have quickly been followed by a bounce. Of course it isn’t just the last 3 years that the indicator has been helpful.

The study below is one I have shown many times before. It looks at SPX performance if you were to buy the index when the CBI reached 10 or higher and then sell when it returned back down to 3 or lower. Results are updated.

The COVID Crash in March of 2020 accounted for most of the gross losses. Other than that instance, the strategy would have performed very well over the years. And the last 9 instances have all closed higher, making for a nice run since the start of 2022.