It’s quite simple: better tools = better outcomes!
For the past week, I have been highlighting the extremes bullish sentiment in the Rydex data. But to be honest and fair and more accurate, I have been highlighting these bullish extremes for over 2 months now. On numerous occasions, I have suggested that the data is consistent with a market top. It wasn’t so much the bullish extremes in the Rydex that were consistent with a market top, but how the market got to a point that was clearly unsustainable. And once again, that point was recognized over 2 months ago. As the market levitated through out Quarter 1 and part of Quarter 2, it was clear that this straight up move was bound to unravel. There was no backing and filling of price. There were no bull signals (i.e., more bears than bulls), and it was only bulls all of the time. This is a poor foundation to any sustainable rally. The price action for the entire rally was reminiscent of the last 20% of price moves when investors want in at all costs. This was clear from studying prior market rallies and the Rydex asset data over the past 12 years.
Over the past week, the Rydex bulls really became bullish. All of our Rydex indicators pointed to one outcome. There were too many investors on the same side of the trade. One of our short term composite indicators was at a point only seen 5 times over the past 12 years of data. Short term or more intermediate term market tops aren’t far behind when investor sentiment gets this extreme. Or to put it another way and as stated to our paying subscribers: there will be better buying opportunities ahead.
So in the department of “better tools, better outcomes”, this is the chart presented to paying subscribers earlier in the week. It is a composite indicator of all of our short term sentiment data. This data is available in the “Daily Sentiment Report”, and if you act today, you can receive our service at a 33% discount for the next 6 months. Click Here: “SIGN ME UP”. Offer expires 5.6.12 at midnight EST.
Figure 1. Composite Sentiment Indicator/ Rydex data