Wednesday, February 23, 2011

The Rydex Market Timers

Two consecutive down days in the equity markets must seem like Armageddon for those whom forgot the markets can go both ways.  But let's be real.  Nothing has happened.  A 3% down draft in two days after a 30% moonshot in the SP500 over the past 6 months is nothing, and at best, this week's events serve to remind investors that markets MAY go in both up and down directions.  Risks have been rising for awhile, and it is just not because the bullish (sic: foolish) extremes in sentiment.  Rising and persistent trends in the CRB Index, gold, and yields on the 10 year Treasury are significant headwinds.  Crude oil had a high probability of trading higher.  Something had to give, and investor sentiment is just one part of the market puzzle.

Presented below is data from the Rydex family of mutual funds.  Rydex is useful as sentiment data because it assesses how investors are positioned (short v. long) and if they have conviction in those positions (leveraged v. non leveraged).  In addition, this is not opinion based sentiment data, but it is based upon real dollars and cents flowing into real funds.  Lastly, there is over 10 years of data covering 2 bull and 2 bear markets.

The attached daily report (Premium Content) is from 2.21.11.

rydex report for 2.21.11

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