Figure 1 is a daily chart of the S&P500. The indicator in the lower panel measures the ratio of the amount of assets in the Rydex bullish and leveraged funds relative to those funds that are bearish and leveraged.

Figure 1. S&P500/ daily/ Rydex Bullish and Leveraged v. Bearish and Leveraged

The current value of the indicator stands at 0.90 suggesting that the Rydex market timers are bearish, and this is a bullish signal. See the recent strategy piece on how this signal is combined with the 200 day moving average.

Anecdotally, heading into a holiday weekend, one should expect light trading, and this may be exacerbated by the snowy weather throughout the Northeastern part of the USA. One would expect that the light volume trading will help the bulls in the short term. Expect the market to be pushed around easily.

Lastly, as a reminder, this is a very short term trading strategy, and it does not say anything about the intermediate term direction of the market.

In response to requests of the readers I have posted 2008 and 2007 charts below.

Figure 2. S&P500/ daily/ Rydex Bullish and Leveraged v. Bearish and Leveraged/ 2008

Figure 3. S&P500/ daily/ Rydex Bullish and Leveraged v. Bearish and Leveraged/ 2007

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.

© 2010 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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