Tuesday, February 23, 2010

Rydex Market Timers: A One Day Bet

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 1.34. As suspected, this turned out to be an isolated bearish bet rather than increasing fear and a move to the sidelines by these market timers. In any case, this now represents a short term sell 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 later in the week!


Luv them Waves said...

Hi. I've been viewing these charts with interest.

Is chart #3 the one that best expresses the short term play on this concept?

Guy M. Lerner said...

You can download the series of Rydex charts at this link.

the chart you refer to looks for relative and absolute extremes in buying and selling with the total amount of assets in bullish and bearish funds

it can function as both a short term and long term play; extremes in buying, which are actually sell signals, tend to occur with prices above the 200 d MA; extremes in buying that occur with prices below 200 d ma tend to lead to continuation

When I get this premium service up and running (and it should be shortly) I will have the ability to answer your questions and provide further details on the indicators, etc

Luv them Waves said...

Thanks, looking forward to it.

Anonymous said...

sure enough, Rydex works like a charm as show today!

Guy M. Lerner said...

I always caution that there is no holy grail; it is just signposts and nothing else.... the data allows one to function or navigate in the markets in a manner that is against the consensus