From Schaeffersresearch.com:
For nearly a decade, mutual fund investors have been able to time the
market using the Rydex Nova, which is set up to move with the SPX, and the
Rydex Ursa fund, which invests to move inversely to the SPX. Using the
total asset and NAV data of these funds to create a measure of "shares"
invested, this measure of mutual fund investor sentiment signals a market
bottom with a low Nova/Ursa ratio (lots of investors in the bearishly
oriented fund). Likewise, a high Nova/Ursa ratio signals an excess of
investors in the bullishly oriented fund, a sign of optimism and an
impending market top. Since 1999, this ratio of Nova "shares" to Ursa
"shares" has ranged mostly between 0.25 and 0.70 (View chart at:
schaeffersresearch.com
). Most recently, a reading of 0.71 on March 15 coincided with a market
top in mid March and a ratio of 0.25 on July 23 came on the day of the
recent market bottom. The Nova/Ursa ratio has been increasing very rapidly
during last month's rally, a sign that mutual fund investors are flocking
into the Nova fund and out of the Ursa fund very quickly. While it took
the ratio more than four months to cross from the top to bottom of its
range, it may cross back to the upper end, signaling a short-term market
top within a few weeks. This ratio, currently at 0.50, has also
occasionally peaked at 0.60 as well. |
