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 0.90 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