Silly Money Ratio Hits Highest Levels Since 2007

March 26th, 2013

by Chris Kimble

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Even though the Dow stands at all-time highs and the S&P 500 is within a few points of its all-time high, the S&P 100 remains 17% below its highs reached 13 years ago. Does it have to do with a 26-year resistance line? I doubt that is the main reason.

Anyone have a good explanation why this is happening? Regardless of the reason, from a "Power of the Pattern" angle, the S&P 100 is facing a 26-year resistance line right now that is tied into the 1987 highs and 2002/2003 lows. This line has been in place for the last 10 years, and this is the closest the index has been to this line.

I shared with Premium and Sector Extremes and Global Dashboard members last week that the Rydex/Silly Money Ratio is hitting levels last seen back at the 2007 highs, reflected in the chart below.

Why do I call it "Silly Money?" Because the Rydex investors have done some silly things at key highs and lows over the past few years! At market lows (shaded in Green) they had low exposure to bull funds, and at market highs (shaded in Red) they have had large exposure to bull funds. Now the ratio is hitting levels last seen back in 2007.

Should investors "Exit Stage Right?" No!

Should investors know where the Exit Door is due to the pattern in the top chart and the Rydex ratio? Yes!



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