Every week I present the following chart in our sentiment round up. See figure 1. It is the Rydex total bull to bear ratio. The indicator in the lower panel of figure 1 measures all the assets in the Rydex bullish oriented equity funds divided by the sum of assets in the bullish oriented equity funds plus the assets in the bearish oriented equity funds. When the indicator is green, the value is low and there is fear in the market; this is where market bottoms are forged. When the indicator is red, there is complacency in the market. There are too many bulls and this is when market advances stall.
Figure 1. Rydex Total Bull/ Bear Ratio/ weekly
In general, the indicator is responsive enough that it tracks price changes relatively quickly. However, over the past two weeks the indicator has headed lower while prices have headed higher. This is unusual. In other words, the Rydex market timers have not been buying into the rally. Typically, these traders are wrong on the markets, but they have yet to turn bullish despite the 10% gains over 10 trading days.
These research notes, which you can access below, on this interesting divergence were presented three days ago to subscribers of our Premium Content service. The Premium Content service is the best $104 you will ever spend on market research. The daily report is meant to keep you on the right side of the market and improve your market timing. That's 40 cents a day!
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