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Morning Matters:

The Worst Is Over For Now
by Geoff Garbacz

May 9, 2018

The Erlanger Big Barf (EBB) Indicator tells us when the S&P 100 reaches points of extreme greed and fear. It appears for now the worst of the February through April is over.

The EBB tracks the relationship of the S&P 100 and the CBOE Volatility Index commonly referred to as the VIX. The EBB on February 8th hit an extreme of -30.49. Then weeks later the EBB hit +25 on February 26th.

Below is the history of all the +25 and -25 scores on the EBB since inception. When -25 is hit, we let it rise to a peak and then see how far it drops. The current drop took us to the April 2nd low and saw the drop be -7.11%.

Meanwhile, the +25 was hit on the above peak as well and then dropped to the April 2nd low produced the same loss of -7.11%. With that low over a month ago, it seems reasonable to say the low tracking is couple. The drop was decent but nothing extraordinary like the drop in September of 2001 that fell -32.01%.

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