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Rydex Report For 3.19.10

The document summarizes several Rydex fund indicators that provide insights into investor sentiment. Most indicators show that Rydex investors have become overwhelmingly bullish in the short-term, with money flowing out of money market funds and into bullish funds. However, some longer-term weekly indicators suggest a potential topping process may be underway. While the markets could continue higher in the short-run, the document recommends patience given the conflicting signals between short and longer-term indicators.

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glerner133926
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2K views8 pages

Rydex Report For 3.19.10

The document summarizes several Rydex fund indicators that provide insights into investor sentiment. Most indicators show that Rydex investors have become overwhelmingly bullish in the short-term, with money flowing out of money market funds and into bullish funds. However, some longer-term weekly indicators suggest a potential topping process may be underway. While the markets could continue higher in the short-run, the document recommends patience given the conflicting signals between short and longer-term indicators.

Uploaded by

glerner133926
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Figure 1.

Rydex Bullish and Leveraged to Bearish and Leveraged/ daily

1) The ratio of Bullish and Leveraged to Bearish and Leveraged: 2.56

2) Values <=1 (below blue line) means more bears than bulls and typically this is bullish for
prices

3) Values >=2 (above red line) means more bulls than bears and typically, this is bearish for
prices
Figure 2. Rydex Money Market Fund/ daily

1) High indicator value suggests fear as investors are seeking the safety of the money
market fund; this is bullish for higher prices

2) Low indicator value suggests complacency as investors are fully invested; this is bearish
for higher prices

3) The trading bands are set to identify values that are 2 standard deviations above normal
over the past 40 trading days
Figure 3. Rydex Relative and Absolute Combination Indicator/ daily

1) When the indicator is green  bullish for higher prices

2) When the indicator is red  bearish for higher prices

3) The indicator uses the total amount of assets in all bullish funds and the total amount of
assets in all bearish funds; the indicator looks for both relative and absolute extremes in
the data
Figure 4. Rydex Combo Indicator/ daily

1) Figure 4 is a composite indicator constructed from figures 1 -3.


Figure 5. $VIX/ daily
Figure 6. Rydex Total Bull v. Total Bear/ weekly

1) The indicator uses the total amount of assets in all bullish funds and the total amount of
assets in all bearish funds

2) The indicator attempts to identify multi – week swings

3) When the indicator is green, Rydex investors are bearish and there are more assets in
bearish oriented funds than bullish oriented funds; in general, this is bullish for higher
prices

4) When the indicator crosses above the signal line, prices tend to move higher

5) Indicator values >=58% lead to intermediate term tops


Figure 7. Rydex Buying Power/ weekly

1) This indicator is constructed from all the assets in the Rydex Money Market Fund and
from the total amount of assets in all bullish funds plus the total amount of assets in the
bearish. Essentially, this is a combination of our two buying power indicators: my old
version and the TradeKing version.

2) The purpose of the indicator is to assess the amount of money or buying power on the
sidelines

3) High buying power  bullish signal

4) Low buying power  bearish signal


My Comments

1) What a difference a day makes. When I first saw tonite’s indicators, I said, “Wow!”

2) The Rydex market timers are now overwhelmingly bullish.

3) Figure 1: the leveraged bull to leveraged bear ratio is 2.56; this is the 4th highest value
since the rally began in March, 2009

4) Figure 2: money market funds have become extremely low

5) Figure 4: with 2 out of 3 of our indicators overly bullish (i.e, bear signal), the composite
indicator is decidedly bearish

6) Figure 5: the VIX is setting up too; remember tops are processes and bottoms are an
event.

7) The longer term measures, such as figures 6 and 7, are suggestive of a topping process.

8) Extremes are now seen in figure 6 and figure 7. Figures 6 and 7 are on the intermediate
term time frame (weekly).

9) The indicator value in figure 6 is > 60%; the value can go higher, mind you, as there was
a 66% reading in 2005. During that time when the indicator hit 58% the S&P500 was at
1184; 8 weeks later the indicator hit 66% and the S&P500 hit a high 1217.

10) Figure 7 is a composite buying power indicator of my old version and the TradeKing
version (see the most recent special report). The red vertical bars represent those times
when the buying power was extremely low (on both measures). It is clear that the market
has continued to advance despite 5 extremes in this indicator over the past 6 months.
But on closer inspection, the market really has stalled or sold off –albeit for only several
weeks – when this indicator hit extremes of low buying power.

11) I tend not to rationalize the data or indicators, so I am having trouble seeing why
this time will be different. Why ignore the data now?

12) So with this in mind, patience is important here. I would feel irresponsible if I
recommended to you to ignore both the short term and longer term signals from this data.
Even if the markets moved higher over the short term, I feel that you would need to
thread the needle to make money. This is very hard to do.

Lastly, just a reminder about accessing the material on the site. Some but not all of the
users of the site have had difficulty accessing reports via the link to Scribd. One, I make the link
private to protect my content and your investment in the service. Two, this appears to be random.
Three, I have not found a fix either on the Scribd site or messing around with other browsers.
Four, I don’t have a solution.

So, if you are unable to access via the link to Scribd, just click on the HOME link in the
right hand column and look below the FILES bar ; you will see a direct link to the PDF.
This is very simple.

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