Global Futures Bottom Indicator (GFBI)

 

            Global Futures Bottom Indicator (GFBI) is to detect the market’s pivot.  It is very powerful to identify the trend when its reading is extremely low (less than 5) or extremely high (larger than 5).  This indicator successfully called the historical bottom.

The indicator that might interest traders is the Global Futures Bottom Indicator (GFBI).  It is evolved from calls and puts on weekly basis. This index is refreshed every Sunday.  It is mainly used to detect the market’s pivot. It is designed not only for long-term investors to avoid trending in the wrong time, and wrong direction, but it also offers short-term investors foolproof timing to capture the tide and fluctuation of the market. 

Since you need to purchase this data, and it’s not freely published, the technical indicator is not that well-known, compared with the other indicators, such as RSI, VIX, ISEE, TRIN, etc. To our knowledge, this index is only available on wallstreetcourier.com. Of course, this site provides a lot of other technical indicators, information, knowledge, as well.  

Usually the WallStreetCourier.com only shows two weeks’ worth of data on the weekly update, but you can download the historical data from its website.

GFBI chart from WallStreetCourier.com demonstrates how traders can utilize the Global Futures Bottom Indicator (GFBI) to capture the market reversal. This chart also shows the correlation between the S&P 500 movement and GFBI.

Here are the scales for this reading you need to pay attention to.

The GFBI readings less than 5 are very dependable for determining that the intermediary base has been formed in bull markets.  Readings between 6 and 25 indicate that the GFBI is working better combined with other indicators.  Readings above 600 indicate that the market is in a strong uptrend, and more upsurge potential should be anticipated by investors.

For example, on 1/4/2013, the reading for the GFBI was 790, which did not happen often. According to the interpretation above, the market would be in a strong uptrend.  The Dow Jones Industrial Average closed at 13,391 on 1/3/2013. The market went up without major pull back until 2/19/2013, when the Dow Jones Industrial Average closed at 14,035.  The market took a deep breath for four trading days between 2/20/2013 and 2/25/2013 with a 251 point drop. Then the market gained the momentum again, and the market kept pushing up until 4/11/2013. 

On the other hand, on 3/6/2009, the GFBI reading was 0.5.  Every investor knows that 3/9/2009 was the historical bottom after the 2007 meltdown.  The GFBI successfully called the bottom. 

The drawback for the GFBI is that it won’t tell you when to sell.  So, setting appropriate stop loss or limit is the key to applying this indicator on existing positions. 

Credited to www.WallStreetCourier.com