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Figure 1. S&P500/ daily/ Rydex Bullish and Leveraged v. Bearish and Leveraged
The current value of the indicator stands at 0.90 suggesting that the Rydex market timers are bearish, and this is a bullish signal. See the recent strategy piece on how this signal is combined with the 200 day moving average.
Anecdotally, heading into a holiday weekend, one should expect light trading, and this may be exacerbated by the snowy weather throughout the Northeastern part of the USA. One would expect that the light volume trading will help the bulls in the short term. Expect the market to be pushed around easily.
Lastly, as a reminder, this is a very short term trading strategy, and it does not say anything about the intermediate term direction of the market.
In response to requests of the readers I have posted 2008 and 2007 charts below.
Figure 2. S&P500/ daily/ Rydex Bullish and Leveraged v. Bearish and Leveraged/ 2008
Figure 3. S&P500/ daily/ Rydex Bullish and Leveraged v. Bearish and Leveraged/ 2007
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6 comments:
this thing is becoming so funny; today, you don't have to think anymore, you just look at Rydex timers; if they are bearish, just do the opposite with no extra thinking (they are for sure wrong). It's like a catch game; what do Rydexers today? Oh, ok; let's do the opposite and make some money :)
I wonder how's that these Rydexers are still in business after all trades going against them for decades now?!?!?!
It's a trend indicator and not a buy sell indication. Life is not this easy, nor is trading today. The Rydex is likely to be beyond its usefulness in today's ETF world, but has not totally lost its ability to show what other traders are doing just as the weekly COT's do.
It seems like the Holy Grail and that would have me worried; strategies that test out well, sometime don't perform well. Why? The markets change.
This is why I discuss MAE's and stuff like that so we can get an idea of how a strategy did before -just not P&L but how it made that money; if a trade starts losing money unlike before, then maybe something is up
It is ok for a strategy to lose money, but people probably get burned because they get greedy.
With regard to the Rydex funds in the ETF world, these market timers are just a snapshot of market participants and if there is one constant in the market, it is fear and greed.
As far as COt's, it is very hard to use data across all the assets that they have data for. My pockets aren't as deep as the smart money,commercial traders.
I asked before who's the "smart money" on the field? Is Morgan Stanley "smart money"? Yes; yet they bought commercial real estate at the 2007 top; is Citadel smart money? probably, yet they lost big in 2008; is Citigroup smart money? Well, they are pros, but they did poorly, etc. etc.
Now we have the indicators Guy shows here; based on these dumb/smart money, we can see if someone stayed with dumb money in 2009 they made more than if they bought when smart money went bullish then sold when dumb money went bearish.
Then you have COT; useless.
Then we have the Rydex timing as shown here; this thing went well in 2009.
Etc. etc.
Is this the new world of investing? Great, isn't it? It's like a catch game; if you're bearish, I go bullish because for sure you're wrong (you cannot be right because you're a poor Rydexer).
Today every single trader calls himself a contrarian; I wonder if these are not the majority out there.
"Now we have the indicators Guy shows here; based on these dumb/smart money, we can see if someone stayed with dumb money in 2009 they made more than if they bought when smart money went bullish then sold when dumb money went bearish."
I wanted to add the dumb money is still money!
D-man
It does get confusing
I like contrarian analysis for two reasons:
1) fear and greed are consistent behaviors
2) if 90% of market participants don't make money, why put my horse with them?
read my most recent article...I don't think it is anything magical...everything is just a signpost of how I am going to navigate in the markets
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