Sunday, February 21, 2010

Rydex Market Timers: Making Bearish Bets

Figure 1 is a daily chart of the S&P500. The indicator in the lower panel measures the ratio of the amount of assets in the Rydex bullish and leveraged funds relative to those funds that are bearish and leveraged.

Figure 1. S&P500/ daily/ Rydex Bullish and Leveraged v. Bearish and Leveraged

The current value of the indicator stands at 0.80. Of note, this appears to be an isolated bearish bet as the assets in the Rydex Money Market Fund are decreasing not increasing. Typically, as a sign of fear, assets in the Rydex Money Market Fund will rise as bearish bets are made. In any case, I don't like to rationalize the indicators or strategies. I take all signals, and this is now a (short term) buy signal. See our recent strategy piece on the use of the Rydex leveraged assets.

You can view the 5 chart set of Rydex graphs that in all likelihood I will be offering as a value added thank you to those subscribers who make a financial donation to support the blog. More to follow!

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