Friday, January 5, 2018

Uncharted Rydex Territory

Got my bag
Got my reservation
Spent each dime
I could afford
--Doris Day

Lots of people joining the president in jumping on the market bandwagon. Positive start to the trading year adds to the market's parabolic shape.

Human nature being what it is, these higher prices are attracting investors like moths to flame. One measure of how optimistic market participants are becoming comes from the Guggenheim (formerly 'Rydex') series of mutual funds that offer both bullish and bearish alternatives for active managers. Comparing Rydex bullish vs bearish assets offers an interesting take on prevailing sentiment.

As reported here, the ratio of Rydex bullish:bearish is in uncharted territory. After screaming higher over the past couple of months, the ratio is at an all time high as of Jan 2.

While correspondence is not perfect, extremes in the bull:bear trend in both directions have been useful harbingers of significant trend reversals over the past few years.

Investors are once again demonstrating that they want to jump on the train before it leaves the station--even if the sentimental journey ultimately derails.

no positions

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