The Rydex market timers are betting heavily that an end of the year bounce will materialize as the bullish and leveraged assets now exceed the bearish and leveraged assets by more than 2 to 1. See figure 1, a daily chart of the S&P500 with the ratio of bullish and leveraged assets to bearish and leveraged in the lower panel.

Figure 1. S&P500/ Rydex Leveraged Bull v. Leveraged Bear/ daily

Now remember the Rydex market timers are only a representative sample of all market participants, but we should note that the ratio of leveraged bulls to leveraged bears, which is greater than 2 to 1, marked every short term high in the S&P500 going back to mid - June. These are highlighted by the maroon vertical lines.

One must assume that market participants are expecting higher prices. As we know, what we expect and what we get are often two different realities when it comes to the market. Our expectation is for higher prices, but the market (or person at the buy button) didn't get the memo this week. Volume is light, and the price action is moribund and random.

By Guy Lerner

http://thetechnicaltakedotcom.blogspot.com/

Guy M. Lerner, MD is the founder of ARL Advisers, LLC and managing partner of ARL Investment Partners, L.P. Dr. Lerner utilizes a research driven approach to determine those factors which lead to sustainable moves in the markets. He has developed many proprietary tools and trading models in his quest to outperform. Over the past four years, Lerner has shared his innovative approach with the readers of RealMoney.com and TheStreet.com as a featured columnist. He has been a regular guest on the Money Man Radio Show, DEX-TV, routinely published in the some of the most widely-read financial publications and has been a marquee speaker at financial seminars around the world.

© 2009 Copyright Guy Lerner - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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