Fizzle

Being on the sidelines makes you look at the market from a half empty perspective.  The early productivity and labor cost news triggered an emotionally charged rally that lasted until 3 pm ET.  But the 100 point gain turned into a 20 point gain by the close. 

        

We often talk about the opening hour of trading being emotional, less sophisticated, money while the late trading is considered the smart money.  So again we are seeing signs that the smart money is selling strength.  We've seen similar failed breakouts in the S&P six times this year, and the next day was lower five of those times.

I showed you a similar chart earlier in the week but this one chart from www.sentimentrader.com is a bit easier to read.  This represent the ratio of assets in the Rydex Government Money Market Fund. 

            
                                  Chart provided courtesy of www.sentimentrader.com

As of last Friday, less than 23% of assets were in safety of the money market fund.  We can see from the chart that the only other time there were this few assets in the fund was in late December 2004, right before the broader market tumbled to begin the new year.  We'd have to go all the way back to February 1, 2001 to see the another time assets were this low.  That was the very peak before the S&P dropped 18% over the next month and a half.   

Just for perspective, about 50% of all assets were put into the money market after 9/11 and again in mid-July 2002 as uncertainty reached a fever pitch.  Even as recently as late October, more than 30% of assets were in "cash", which may not seem like a big change, but it was about as high as it has gotten over the past coupe of years.

Today is the 5th trading day in December.  It starts the seasonal mid-December lull.  Between now and the middle of the week before Christmas the S&P 500 has actually been down more often then up. 



I'm hoping this triggers enough weakness to get some of the indicators in better shape so I can get a little more aggressive just before Christmas.  I am getting quite tired of being in the G fund.  In hindsight I had many chances to make money over the past several weeks but we didn't have any high odds opportunities to get in stocks.  A lack of playable pullbacks and consistent overbought conditions are the reason. 

If the next week or two can dish out some weakness and send the short term  indicators into oversold territory, it should set up another leg up for this strong end of year rally.

That's all for today.  Currently 100% G fund.   Thanks for reading.