5 replies to this topic

[eminimee]

or anyone else......opinions please. Total Assets in the Rydex URSA fund are at the similar lows seen back in early 04 and Rydex money market fund assets at the lowest lows that have been seen in more than 5 years. (source: Tom McClellan) The low mark in the bear fund I could possibly dismiss somewhat because of more money going into short positions using the onslaught of ETF's and could say that what was once a fairly reliable indicator is now watered down some.....but the low level in money market fund has me concerned. Thoughts?

[fib_1618]

...but the low level in money market fund has me concerned. Thoughts?

On the one hand it might suggest that many are fully invested in "something" that may include equities (Rydex has many investment vehicles where one can equally allocate). Sentiment wise this could be looked upon as a warning that a near term shake out is needed to keep the majority from participating in any further advance. On the other hand, being in a money market fund that only offers a 2% yield is foolish if something else is offering a higher return as equities have done over the last 6 months.

And then you have the Elliott perspective in all of this where wave 3's are "point of recognition" structures where being fully invested IS the right thing to do. I guess it all comes back to my earlier question of whether or not a "Melt Up (is) in Progress" or not. If this is indeed the case, we might see a quick and sharp pullback to make these same traders "feel" that it's in their best interest to go to cash before moving higher yet again or, I guess, we can just keep going knowing that more than 80% of the major market averages are all ready at all time highs anyway, where everyone is a winner, and no real reason to sell.

Fib

[Echo]

A few points

1. After peaking in Jan 2005 and holding steady through 2005, rydex total assets have been on the decline throughout 2006, likely due to competition via Profunds, Direxion, and all the new and leveraged ETFs.

2. Rydex cash flow ratios are a better judge of intermediate term money flow in and out of bull and bear funds than total assets as explained here: http://www.decisionp...RydexRatio.html

3. The rydex cumulative cash flow ratio has been in a "trading range" since the inception of this bull market in 2003 and I note that

a. The last correction of substance in May-July 2006 created a deeper bearish drop since 2003 indicating pessimism

b. The rebound bull trend since June-July 2006 has created a very muted bullish shift suggesting disbelief and pessimism

c. This same indicator has been trending towards bearish net transactions since Nov-Dec where the current value is closer to areas of previous bottoms rather than tops (though it is similar to the value near the TOP in May 2006 as there was similar disbelief in the rally from Dec 2005- May 2006.)

Finally remember that since this data is limited to only a tiny piece of the market pie, even changes in ratios can be misleading as people may shift funds laterally for reasons unrelated to market bias. For example, perhaps shifting out of as sector fund to and etf so as not to have to watch it daily for exits and be trapped in end of day trading whereby an etf can offer the benefits of intraday trading and the ability to place stops.

Echo

[mortiz]

As far as the Rydex Ursa fund assets shrinking over the past several weeks, there are likely several factors involved including competitive products for shorting and hedging all over the place these days, including the Rydex family of funds who have introduced a wide variety of Ursa alternatives over the past couple of years. Another reason for shrinking Ursa fund assets, as Fib suggests, is recognition of the trend, adversity to the mounting losses on the short side, etc. For the past several weeks, the Ursa asset levels have been moving sideways, suggesting the majority of the weak hands in the fund have been squeezed.

As far as the "low" level of the Rydex money market fund, at least according to my figures, the Rydex money market fund currently constitutes about 15.7% of the total dollars reported in the Rydex universe of funds. The 150 day moving average of the percentage of Rydex money market assets relative to all Rydex fund assets is a little over 15.1% as of Friday.... so the current money market percentage of total assets is nominally above the average over the past 30 weeks.

Speaking of sentiment, I found it interesting the smallest equity retail options traders (1 to 10 contracts per transaction) buy-to-open (BTO) put call ratio actually rose last week to 0.51, its highest level since October 2006. The likelihood of these small traders buying opening positions in equity options as hedging strategies is low. Thus one can conclude the BTO activities of these smallest traders represents their collective feeling of the near term direction of equities.



Thus at least for last week, these smallest retail equity options traders weren't convinced this latest pop in prices has legs... they may be right this time, but their collective abilities of being on the right side of the market is not stellar.

FWIW

Randy

[Gary Smith]

A few points

1. After peaking in Jan 2005 and holding steady through 2005, rydex total assets have been on the decline throughout 2006, likely due to competition via Profunds, Direxion, and all the new and leveraged ETFs.

2. Rydex cash flow ratios are a better judge of intermediate term money flow in and out of bull and bear funds than total assets as explained here: http://www.decisionp...RydexRatio.html

3. The rydex cumulative cash flow ratio has been in a "trading range" since the inception of this bull market in 2003 and I note that

a. The last correction of substance in May-July 2006 created a deeper bearish drop since 2003 indicating pessimism

b. The rebound bull trend since June-July 2006 has created a very muted bullish shift suggesting disbelief and pessimism

c. This same indicator has been trending towards bearish net transactions since Nov-Dec where the current value is closer to areas of previous bottoms rather than tops (though it is similar to the value near the TOP in May 2006 as there was similar disbelief in the rally from Dec 2005- May 2006.)

Finally remember that since this data is limited to only a tiny piece of the market pie, even changes in ratios can be misleading as people may shift funds laterally for reasons unrelated to market bias. For example, perhaps shifting out of as sector fund to and etf so as not to have to watch it daily for exits and be trapped in end of day trading whereby an etf can offer the benefits of intraday trading and the ability to place stops.

Echo

Super analysis Echo and the best I've seen on the Rydex asset flows in many a moon on this forum. Your comments in 3b are especially cogent.

Edited by Gary Smith, 04 February 2007 - 12:42 PM.

[Echo]

A few points

1. After peaking in Jan 2005 and holding steady through 2005, rydex total assets have been on the decline throughout 2006, likely due to competition via Profunds, Direxion, and all the new and leveraged ETFs.

2. Rydex cash flow ratios are a better judge of intermediate term money flow in and out of bull and bear funds than total assets as explained here: http://www.decisionp...RydexRatio.html

3. The rydex cumulative cash flow ratio has been in a "trading range" since the inception of this bull market in 2003 and I note that

a. The last correction of substance in May-July 2006 created a deeper bearish drop since 2003 indicating pessimism

b. The rebound bull trend since June-July 2006 has created a very muted bullish shift suggesting disbelief and pessimism

c. This same indicator has been trending towards bearish net transactions since Nov-Dec where the current value is closer to areas of previous bottoms rather than tops (though it is similar to the value near the TOP in May 2006 as there was similar disbelief in the rally from Dec 2005- May 2006.)

Finally remember that since this data is limited to only a tiny piece of the market pie, even changes in ratios can be misleading as people may shift funds laterally for reasons unrelated to market bias. For example, perhaps shifting out of a sector fund to an etf so as not to have to watch it daily for exits and be trapped in end of day trading whereby an etf can offer the benefits of intraday trading and the ability to place stops.

Echo

Super analysis Echo and the best I've seen on the Rydex asset flows in many a moon on this forum. Your comments in 3b are especially cogent.

Thanks Gary for the kind words. It means a lot coming from you.

Echo