05/14/2010
Rydex Cash Flows
(This is an excerpt from Friday's blog for Decision Point subscribers.)
I have not looked at the Rydex Cash Flow charts for some time. A subscriber presented the following:
QUESTION: I was wondering about your take is on recent Rydex Cumulative Net Cash Flow Analysis activity which resembles just prior to 2008 plunge. Granted, we had last Thursday but.... Thank You , long time reader and subscriber.
The chart shows a massive outflow of funds from Rydex Bull and Sector funds immediately after the minute-crash on May 6. Whereas the outflow you highlighted in 2008 seems to be in anticipation of the decline that followed it, the current outflows seem to be in reaction to the crash.
A notable feature on the chart is that the current outflows have reached a level that has repeatedly proven to be an exhaustion of selling over most of the last three years. With the market in the process of a retest of recent lows, those exhaustion (oversold) levels could be exceeded, but there is a good chance that a successful retest will be completed soon, and that the bull market will resume.
Rydex activity is, after all, only a representation of what Rydex investors are doing. Nevertheless, it does at least give us a hint as to possible money flows in the broad market.
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BIO: 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 indicators, charting, and focused research reports. Mr. Swenlin is a Member of the Market Technicians Association.
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