High Risk, Medium Confidence

The risk of a crash is high, while confidence in this signal is medium. What does that mean?

I want to separate an open possibility from the chance that the market will use this possibility. A possibility exists when the ground is ready and certain conditions for destabilization or reversal are in place. The reversal or destabilization itself has not happened yet.

This is why I introduced a parameter called Signal Confidence. It shows how confident the system and I are in the signal we give today. The system has to produce an assessment every day. It cannot be equally confident every day.

On some days, the system can say that the data is highly contradictory and there is no normal basis for assigning a strong probability to either direction. The data can disagree, be incomplete, or form unclear and unusual patterns that are difficult to interpret adequately.

Let us look at today's situation. The market stayed near the bottom in a sideways movement from late June until the middle of August, almost two months. Volatility was extremely low. Now we see a price explosion.

I will not explain here what caused this explosion. I see several things existing at the same time. On one side, there is a strong impulse that cannot be ignored. On another side, this is not yet a confirmed trend because confirmation needs time. And on a third side, after an abnormal rise that we probably have not seen during all of 2026, a sharp pullback can be expected.

On a small timeframe, the price moves away sharply and leaves liquidity gaps, meaning areas it crossed too quickly. Together with other factors, they create potential for a reversal and movement down.

There is enough fuel for a move down today to produce a red signal. But the market is still being bought. With activity that has not appeared during all of 2026, growth can continue.

Today's signal should therefore be read this way: the market is dangerous from the perspective of a fall, while continued growth remains possible. A strong trend after a long sideways period carries accumulated momentum that can move the price beyond the current range.

This is why today's Market Crash Index is in the red zone at 50, while Signal Confidence is 3 out of 5.