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Strategies & Market Trends : Ask DrBob
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To: Drbob512 who started this subject9/22/2002 10:55:37 PM
From: sentimentrader  Read Replies (3) of 100058
 
The market timers who use the Rydex series of funds are becoming bearish to the point of a two-year extreme. The chart at the link below shows the three-month stochastic of the bullish ratio (which is a weighted ratio depending on fund leverage and a true measure of actual positions taken and timer sentiment). You can see that it is currently at .01, which is almost as low as it can go of course (a stochastic reading goes from 0 to 100). This shows that the momentum into the bearish funds is close to the greatest it has been over the past quarter, and indeed this level has coincided nicely with market turns over the past couple of years.

sentimentrader.com

Let's take a look at last September for comparison. From the end of August to the low on September 21st, traders took $434 million out of the bullish funds while depositing $146 million in the bearish funds and $251 million in the money market. They either deposited the rest with a different fund within the family or just withdrew it. This time around, from the end of August through Friday, traders have withdrawn $232 million from the bullish funds while depositing an astounding $486 million in the bearish funds and only $64 million in the money market. So not only is money flowing out of the bullish funds, new money is being added to the short funds, all while price is holding above a prior recent low.

This is only one set of indicators, and as we can see this past July it is not perfect, the signals it is throwing off now are quite constructive for the market in the intermediate-term.
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