What the herd is doing - not saying
After a Monday morning gap open higher, stocks
turned south and while the Dow ended up in the
green, the other major indices finished in the red
with almost 2 stocks finishing down for every one
that was up on the day.
I have been very confused by the low bulls to bears
ratio we have seen in the sentiment surveys during
this strong rally. Even our normally
consistent TSP Talk survey system has been off
lately. Why are so many investors bearish when
things are going so well? I decided to take a
look at the Rydex Cash Flow ratio which tells us
where the money is actually going. In other
words, it tells us what people are doing, rather
than what they say they are doing.
It's interesting that while the bearish percentage
was over 50% recently, the money being put into bear
funds (betting that the stocks will go down) plus
money that is being put into money markets 9cash),
divided by the money being put into bullish funds
(typical mutual funds), has been going down (or up
looking at the reversed scale chart below).
That means these investors are actually buying more
than selling. We actually just reached the
same level we saw just before the February sell-off.
This is not an extreme reading but it does tell us
that investors are not nearly as bearish as they
were in Mid-March - after the sell-off. That
sounds more reasonable and makes more sense.
Chart provided courtesy of
www.decisionpoint.com
I was considering moving out of the F fund if bonds
rallied yesterday, but they actually were flat to
down (the F fund lost a penny). Today's CPI
report could shake things up today but as to the
direction, I don't know. I do know that the
AGG chart is near support so a break below that
support would convince me to retreat. As long
as this uptrend remains intact, I'll stay the course
- at least in the short-term.
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