Don, I sure would like to see that index rise...
FWIW I have a hard time seeing just up from here. Here are some #s to think about...
Put/Call Ratio: .65
The high for the day came at the close. Why were traders buying puts over calls throughout this rally today?
VIX OPENING VALUE: 29.44
VIX HIGH VALUE : 34.00
VIX LOW VALUE : 29.13
VIX CLOSING VALUE: 31.05
Some RYDEX #s for those interested:
Mny Mkt + Bear funds/Bull and Sector funds
Oct 98 lows... 2.94
Oct 99 lows... 1.5
Today.......... .52
The % of RYDEX bull assets in OTC, Biotech and Other Tech is a staggering 80.5%! Clearly there is no bearish sentiment that marks a true market bottom, complacency rules the roost. The last three times this level has been reached was:
- mid April,
- early July
- early September
These periods were all intermediate term tops, each time a significant decline followed.
Nov 3 1999 level 65%
Oct 4 98 level 40%
All of the other RYDEX ratios are registering bullish levels MUCH higher than the previous OCT lows of '99 and '98.
When the first Rydex Ratio was invented several years ago, it was based on two very small mutual funds -- URSA (bear) and NOVA (bull). Because of the small amount of cash involved (and, presumably, the small number of people using the funds), it was subject to extreme movement in either direction, and I considered it no more reliable than sentiment polls. Things change, and we have to constantly question the basis of our beliefs. In the case of Rydex, the company has added new bear/bull funds (ARKTOS/OTC) plus several of sector funds. Where a few years ago total assets in the two Rydex funds might have been a few hundred million dollars, today Rydex has over 20 funds with assets well approaching $7 billion. This is a very stable platform from which to derive indicators.
This ascension to "critical mass" in recent years has made the Rydex Ratios much more useful as indicators measuring sentiment. Rather than measuring someone's vague opinion about market direction, the Rydex Ratios present specific information about where people are actually putting their money. This is a vote that really means something. Also, we can compare current investing patterns with previous periods and determine when bullish or bearish saturation points are being reached based on an objective, quantitative measuring stick.
MONEY MARKET + BEAR FUNDS / BULL FUNDS + SECTOR FUNDS: For our purposes, this is the "official" Rydex Ratio -- it encompasses virtually all the money in the Rydex Fund group. Because some Rydex trades are executed through brokerages, we also track the net cash flow into and out of Rydex, which allows us to estimate an "inferred" money market amount. The inferred money market calculation assumes that cash leaving Rydex is going into brokerage money market accounts outside of Rydex, and that it will probably be coming back into Rydex funds as soon as investors take a more definite bullish or bearish stand. This is not entirely true, of course, but we believe the estimate is better than nothing.
BEAR FUNDS / BULL FUNDS: This ratio is more subject to distortion because bullish money can go into certain sector funds that may be performing well; however, it does measure the activity of investors engaged in pure index plays.
URSA / NOVA: We still calculate this original ratio for those who like to follow it, but we believe it is too narrowly focused, and that the other two ratios provide a more accurate view of sentiment.
decisionpoint.com
I'm all for a rally, but I still believe these rallys are traps surrounded by massive distribution sessions...SEVEN days this month! Each succesive rally occurs on lower volumes with the exception of today.
stockcharts.com[L,A]DACLYIMY[DA][PB50!B200!D20,2!F][VC60][IUB14!LA8,17,9!LF!LH5,5!LI5,5!LG!LC20]
Just some random thoughts...
Regards,
John Madarasz
O/T BTW, enjoyed your discussion the other day with uw. Here's a link and excerpt you might enjoy...
Brought to my attention by an old friend recently were remarks delivered by the newly appointed commander of our naval air forces in the Pacific ( COMNAVAIRPAC ). The change-of-command ceremony, with which some of you I'm certain are familiar, can be an expansive affair. Vice Admiral John Nathman, however, last month delivered the following 30-second speech upon assuming his command, then sat down before a stunned audience.
My speech should be and will be short. There are two fundamental issues we should understand -- demand and value. Let me explain. This nation, its President and its citizens demand global stability; demand a world inclined to democratic ideals and countries that will protect the rights of their citizens. There is a valid need for a global economy, one that the United States intends to lead. There's a need for constrained oil pricing. There's a need for a community of nations that can deal effectively with rogue states and bullies. This is what the U.S. Navy does. The value of the Naval Service is its willingness to do its duty to meet the nation's demands. We will be asked ... no, ordered, to train, deploy and engage. We engage diplomatically with our forward presence and, if necessary, in combat to sustain those demands. Is it not right then that our men and women have demands too? Isn't it right that the pilots and aircrew we send daily into harm's way have modern and capable aircraft? Isn't it right that our young men and women expect to work in efficient, clean, connected, even new hangers and workspaces? Isn't it right that my naval air force be sustained at levels which support our operations and tempo? Isn't it right that our sailors and their families are paid enough to live in dignity? To me, the fact is that we have reached such a low level of funding it will soon be impossible to meet the expectations of this nation in executing our operational tasks and completing the mission. There is a fundamental disconnect between the value we provide and the willingness of the richest nation on earth to pay for its demands. It is obvious, the Naval Service is undervalued. This, then, is the challenge. It must be resolved.
Defense industry employment is sure to grow, pushed up by an increase in modernization spending from $48 billion two years ago to $60 billion this year. The defense industry also absorbed a job cut of 718,000 during the reduction in government's real size that lasted most of the 1990's. Some readers may recall a brief comment in a February monetary report, responding to the news Microsoft's Bill Gates had invested a significant sum in Newport News Shipbuilding. Many in the reporting media appeared puzzled over the purchase. The comment: FSDAX. I know of no other similar prospect. If anyone does, please let me know.
piraz.com |
