As we get ready to head into 2018, we haven’t seen this in 15 years.
Leveraged Speculation
December 21 (King World News) – Jason Goepfert at SentimenTrader: Traders in the Rydex family of mutual funds are leveraged to the long side to a record degree…
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ALERT: Record 17 to 1 (Long) In Leverage Funds
There is nearly $17 invested in leveraged long funds for every $1 in leveraged short (inverse) funds. Assets in leveraged ETFs aren’t as skewed, but the bull/bear ratio has still climbed to a new record (see chart below).
All-Time Record Leverage Long Stocks!
When speculation has been this rampant, the S&P 500 pulled back 5% both times.
Bottom Line
One factor that is definitely not positive for stocks is the sudden increase in speculative activity and absence of hedging.
In the Rydex family of mutual funds, assets in leveraged long index funds has increased to a 3-year high while leveraged inverse assets (that profit on a market decline) have plunged to a 15-year low. That has pushed the Leveraged Bull/Bear Ratio to a record high.
We can see similar activity in leveraged ETFs. Assets in inverse ETFs have plunged 20% in two months to $3.7 billion while long funds have added assets, now above $10.2 billion. That has just pushed that bull/bear ratio to a record high as well. The other two times we saw spikes like this, stocks faltered. The declines were temporary, but each time, the S&P 500 pulled back by more than -5%. We’d rate this as a short-term negative here.
This is another example of why Jason Goepfert is the best in the world at what he does — providing actionable market data. The charts and commentary above are from SentimenTrader. To try a free 14-day trial of the internationally acclaimed work that Jason Goepfert produces at SentimenTrader simply CLICK HERE.
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***ALSO JUST RELEASED: Jesse Livermore And The Long-Term Gold & Silver Buy Signals That Are Flashing CLICK HERE.
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