Rydex Report for 5.3.11 | Market Trend | Leverage (Finance)

Figure 1.

Rydex Bullish and Leveraged to Bearish and Leveraged/ daily

1) The ratio of Bullish and Leveraged to Bearish and Leveraged: 3.70 2) Values <=1 (below blue line) means more bears than bulls and typically this is bullish for prices 3) Values >=2 (above red line) means more bulls than bears and typically, this is bearish for prices

Figure 2. Rydex Money Market Fund/ daily

1) High indicator value suggests fear as investors are seeking the safety of the money market fund; this is bullish for higher prices 2) Low indicator value suggests complacency as investors are fully invested; this is bearish for higher prices 3) The trading bands are set to identify values that are 2 standard deviations above normal over the past 40 trading days

Figure 2a. Rydex Buying Power/ daily

1) The Rydex Buying Power indicator assesses the amount of money on the sidelines; it is “fuel” available for buying 2) This indicator assesses considers both non – committed money (i.e., assets in the money market fund) and committed money (i.e., assets in all of the bearish funds that could potentially wind up in bullish funds) as available money on the sidelines 3) The indicator is calculated by taking the sum of all assets in bearish plus money market funds divided by all assets in bullish plus bearish plus money market funds 4) Low indicator values suggest little money on the sidelines and are consistent with excessive bullishness (i.e., bear signals) 5) High indicator values are consistent with increased buying power and are consistent excessive bearishness (i.e., bull signals)

Figure 3. Rydex Relative and Absolute Combination Indicator/ daily

1) When the indicator is green  bullish for higher prices 2) When the indicator is red  bearish for higher prices 3) The indicator uses the total amount of assets in all bullish funds and the total amount of assets in all bearish funds; the indicator looks for both relative and absolute extremes in the data

Figure 4. Rydex Combo Indicator/ daily

1) Figure 4 is a composite indicator constructed from figure 1, figure 2a, and figure 3.

Figure 5a. $VIX/ daily

Figure 5b. $VXN/ daily

Figure 6. Rydex Total Bull v. Total Bear/ weekly

1) The indicator uses the total amount of assets in all bullish funds and the total amount of assets in all bearish funds 2) The indicator attempts to identify multi – week swings 3) When the indicator is green, Rydex investors are bearish and there are more assets in bearish oriented funds than bullish oriented funds; in general, this is bullish for higher prices 4) When the indicator crosses above the signal line, prices tend to move higher

5) Indicator values >=58% lead to intermediate term tops

Figure 7. Rydex Buying Power/ weekly

1) The Rydex Buying Power indicator assesses the amount of money on the sidelines; it is “fuel” available for buying 2) This indicator assesses considers both non – committed money (i.e., assets in the money market fund) and committed money (i.e., assets in all of the bearish funds that could potentially wind up in bullish funds) as available money on the sidelines 3) The indicator is calculated by taking the sum of all assets in bearish plus money market funds divided by all assets in bullish plus bearish plus money market funds 4) Low indicator values suggest little money on the sidelines and are consistent with excessive bullishness (i.e., bear signals) 5) High indicator values are consistent with increased buying power and are consistent excessive bearishness (i.e., bull signals)

My Comments 1) Ok, figure 1, which is the Rydex bullish and leveraged to bearish and leveraged ratio, is at it 3.70 2) This is the highest this value has been since the rally began in March, 2009 3) The last time the bulls were this confident was in 2001 4) In other words, these market timers are so confident in their market outlook that they are only expecting one outcome 5) I ask this question: when have you known the market to ever be a sure thing? 6) I would be ok with all this bullishness if the market was coming off a bottom 7) But after 2 years or 100% plus move in the SP500, now people want to go all crazy bullish 8) I really don’t see it 9) Once again, I have never, ever known a sure thing when it comes to the market

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