Beruflich Dokumente
Kultur Dokumente
2) Values <=1 (below blue line) means more bears than bulls and typically this is bullish for
prices
3) Values >=2 (above red line) means more bulls than bears and typically, this is bearish for
prices
Figure 2. Rydex Money Market Fund/ daily
1) High indicator value suggests fear as investors are seeking the safety of the money
market fund; this is bullish for higher prices
2) Low indicator value suggests complacency as investors are fully invested; this is bearish
for higher prices
3) The trading bands are set to identify values that are 2 standard deviations above normal
over the past 40 trading days
Figure 3. Rydex Relative and Absolute Combination Indicator/ daily
3) The indicator uses the total amount of assets in all bullish funds and the total amount of
assets in all bearish funds; the indicator looks for both relative and absolute extremes in
the data
Figure 4. Rydex Combo Indicator/ daily
1) The indicator uses the total amount of assets in all bullish funds and the total amount of
assets in all bearish funds
3) When the indicator is green, Rydex investors are bearish and there are more assets in
bearish oriented funds than bullish oriented funds; in general, this is bullish for higher
prices
4) When the indicator crosses above the signal line, prices tend to move higher
1) This indicator is constructed from all the assets in the Rydex Money Market Fund and
from the total amount of assets in all bullish funds plus the total amount of assets in the
bearish. Essentially, this is a combination of our two buying power indicators: my old
version and the TradeKing version.
2) The purpose of the indicator is to assess the amount of money or buying power on the
sidelines
2) With price greater than the 200 day moving average on the QQQQ, this becomes a
BUY SIGNAL
3) See the Rydex Special Report for 5.24.10 for further details on this strategy
4) It should be noted that the last 3 trades from this strategy were losers
5) Thats 3 losses in a row! Prior to this period there has never been two losses in a
row from this strategy (in over 40 trades in 7 years)
6) So I know what you are thinking: is this strategy due for a winner or is this one of
those times where a strategy goes south (i.e., no longer works) just when you start
to get involved?
7) I dont have the answer for you; for me, personally, I still believe in the value of this
strategy
8) However, I may reduce my exposure ---that is, not take as big of a position
9) Look at the Maximum Adverse Excursion (MAE) graph from this strategy
10) This graph shows every trade from the strategy; winning trades are in green and
losers are in red
11) MAE refers to how much an individual trade has to lose before it is closed out for a
loser or a winner ---MAE is how much you have to angst while the trade goes
against you
13) Looking at all the trades from this strategy we note that every trade but 1 had an
MAE of less than 4% (i.e., to the left of the blue line); the majority had an MAE less
than 2%
15) So lets say I have a $100,000 account and I want to risk only 2% of my capital or
$2000 on this single trade
16) Therefore, I can use $50,000 of my capital since a 4% stop loss (if triggered)
represents a $2000 loss
17) This is how I use the MAE graph to set stops and determine when a trade is a bust
INDICATORS
22) In the Rydex Special Report 5.26.10, I discussed the indicator in Figure 3 and the
implications of the buy signal
23) Figure 2: money in the Rydex Money Market fund has yet to exceed the highs seen
at the February lows
24) This is a point I keep hammering home maybe we just need to see even lower
prices before a bottom is put in
26) The only fly in the ointment: figure 2 and figure 7 both indicate that not much
money moved to the sidelines during the sell off; maybe we need another whoosh
down?