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Rydex Market Timers: This Is Amazing!
Figure 1 is a daily chart of the S&P500 with the amount of assets in the Rydex bullish and leveraged funds versus the amount of assets in the leveraged and bearish funds. This data is hidden, but the ratio of bull to bear, which is depicted by the indicator in the lower panel, is 2 to 1. Since July, 2009, every time this ratio got above 2, it marked a short term top in the S&P500. These are noted by the maroon colored vertical bars.
Figure 1. S&P500/ Rydex Leveraged Bull v. Leveraged Bear/ daily
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Figure 2 is a daily chart of the S&P500 with the amount of assets in the Rydex Money Market Fund in the lower panel. The current value is the lowest value since the rally began in March, 2009. While all of this is short term noise, it is absolutely amazing that there would be this much commitment to the market after a 60% plus run in the S&P500.
Figure 2. S&P500 v. Rydex Money Market/ daily
I follow the Rydex and think its one of the best indicators but the one I see gives a complete different picture although your version makes sense - probably you can explain to me why the Schaeffer version is so different?
http://www.schaeffersresearch.com/streetools/market_tools/rydex_nu.aspx
its the same....the inverse of .5 is 2.... think upside down...
Scahaeffers is making some sort of calculation and calling it adjusted NAV plus they are only including the URSA and NOVA funds, whch I think are the NAS bull and bear funds; I use actual assets and I also use all of the leveraged funds in the calculations
Noobie question: could the money be going somewhere else (eg, bonds or precious metals)?
welcome , berated newby. Mine went to silver before it faded.The dollar is just not as green as it used to be, neither are we . Ha ha
Long on my garden, in a safe place.
Well Yes, but that's the point, Rydex is a market timer's fund or MTH (Market Timer Heaven) when the money market funds total assets drop this low that mean the money is somewhere else within the Rydex world of funds. In other words, all the market timers are on one side of the trade and there No Mo Mony to invest. Think herd. Sometimes herds run in the right direction, remember March 09 and the stock market rally?? Or think Aug 2008.....
Books
Only problem with rolling profits into next year is that the Capital Gains Tax could change. It is an unknown.
The $1 Billion spent by the financial industry buying CONgress over the past decade assures them of no such change. Or if there is (for Congressional PR purposes) a give back will miraculously appear somewhere else. The game is rigged. Always has been. It's just more rigged now, against us rather than for them.
They're rolling profits into next year - taxes would then be due, 4/15/2011.
Yeah, and I imagine by then we'll paying our taxes using pelts and a tally stick.
"While all of this is short term noise, it is absolutely amazing that there would be this much commitment to the market after a 60% plus run in the S&P500."
It appears the dogs have been conditioned to bark every time the Bernanke helicopter is overhead. I would say people are expecting the tap won't be turned off any time soon. I see this as a cynical index rather than dumb money or bravado. People recognize that desperate men (Bernanke and company) will do desperate things and they don't expect the desperation to end anytime soon.
IMHO they are expecting really bad times down the line from this Fed insanity, but the potential for shorter term profits is just too tempting to leave "on the table". Of course, even single person believes they will be smart enough to recognize the down turn when it begins and exit stage right. We shall see.
"...the potential for shorter term profits is just too tempting to leave "on the table"."
Bingo.
Let's be realistic. The fed's balance sheet has doubled with MBSs being the major component of the increase. Who in their right mind would think the FED would raise rates before it can sell them without major losses? Not me. Dollar down for a long long time me thinks...
very much agree with your comments
Replace 'absolutely amazing' with 'exceedingly demoralizing' and you've glimpsed at my sentiment.
Stocks are "parked" at the highs to "demonstrate" the "strength" of the "recovery" and of the "resilience" of the markets.
"Hello, Crash"
That's some funny stuff, Daedal.