My expectation was that the market would go higher and bounce back from the previous week's onslaught, and I am sure that was yours as well. Volume was destined to be light. The headlines, while scary, were prone to rumors, which leads to price spikes. After all, this is Thanksgiving week. The market always goes up during Thanksgiving week. It's America, baby. Mom and apple pie. A buoyant stock market during Thanksgiving is what we have come to expect.
If your expectation was for higher equity prices this week and you are feeling a little bit perplexed and bamboozled, trust me you are not alone. The Rydex market timers have been extraordinarily bullish this past week as well. I guess these traders were expecting the bounce that never came. Figure 1 is a daily chart of the S&P Depository Receipts (symbol: SPY). The indicator in the bottom panel is a ratio that measures the amount of assets in the Rydex bullish and leveraged funds to those assets in the bearish and leveraged funds. This is a unique data point because we are looking at where investors, whom are typically wrong on the market, are putting their money. This is not an opinion poll but real money. Furthermore, not only do we get to see how these traders are betting on direction, but we also see whether they are doing it with conviction (i.e., use of leverage).
Figure 1. SPY/ daily
For the past week, the Rydex bullish and leveraged to bearish and leveraged ratio has been above 2 all week. That is, there are twice as many leverage bulls as leveraged bears, and values above 2 are typically bearish. Of note, last night's value was 2.65, which was the highest value since July, 2011.
I guess we know what these market timers were expecting, and we definitely know what they got.
Let me also remind readers that we are offering a 1 month FREE TRIAL to our Daily Sentiment Report (formerly Premium Content), which focuses on daily market sentiment and the Rydex asset data. This is excellent data based upon real assets not opinions! We have a new 1-click sign up process! Credit cards are not required.