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Technical Guru Swenlin: Rydex Ratio Looking Frothy

by Brett on May 29, 2013

Stock market technician Carl Swenlin looks at the Rydex Ratio today – an indicator screaming out that it’s been a LONG time since sentiment was this bullish.

Rydex Ratio Reflects Very Bullish Sentiment

by Carl SwenlinCarl Swenlin

As prices soar, the Rydex Ratio reflects increasingly bullish sentiment. The chart shows that the Ratio has not reached these levels for over 12 years.

rydex asset ratio 1999 2013Click to enlarge.

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(This is an excerpt from recent blogs for Decision Point subscribers.)

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The Ratio is calculated by dividing the Money Market plus Bear Fund assets by the assets in Bull plus Sector Fund assets. Note that asset levels in the Rydex Money Market and Bear Funds are lower than they were at the 2000 price top. Bull plus Sector Fund assets, however, are only about half of what they were at the 2000 top, but it is unlikely that they will get much higher because today there are a lot more choices outside the Rydex family for making bullish bets than there were in 2000.

rydex ratio asset analysis 2013Click to enlarge.

The Rydex Ratio is at a level that shows extremely bullish sentiment, which is very dangerous for the market. In other articles we have remarked that the angle of ascent for prices has become parabolic, which is also very dangerous. We don’t know where the top of the current advance will be, but the fall from that top is likely to be breathtaking.

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Technical analysis is a windsock, not a crystal ball.

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Carl Swenlin is a self-taught technical analyst, who has been involved in market analysis since 1981. A pioneer in the creation of online technical resources, he is president and founder of DecisionPoint.com, a premier technical analysis website specializing in stock market timing, market indicators, charting, and focused research reports. Mr. Swenlin is a Member of the Market Technicians Association.


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