Despite the market move higher on Thursday the Quantifiable Edges Capitulative Breadth Indicator (CBI) rose up to 10. The CBI is basically a measure of the number of capitulative selling triggers that are active among S&P 100 stocks at any one time. Ten is a level I have discussed numerous times in the past. Readings this high often lead to short-term rallies. Below is a strrategy I’ve shown before that utiilizes the CBI. It looks at entering the SPX when it reaches 10 or higher and then exiting when it returns to 3 or lower.
As you can see, results here are very good. It isn’t an exact timing tool, though. The average, runup and average drawdown are both about 3.5%. So there is has been quite a bit of volatility associated with these setups. The average trade takes 8 days to complete.
A detailed description of the CBI may be found here.
Numerous studies and posts associated with the CBI may be found here.
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