Well, that was fast....the rydex ST buy signal has now turned to a sell signal just like that thanks to big buying on the dip from these guys. Now here's the deal...sell signals haven't always resulted in immediate downside this year but when they didn't and the market went higher or sideways, eventually it would end up giving up those gains and drop further. However, when a Rydex sell signal gets issued after a dip buy like today more often then not, downside follow though occurs the next day or a day or 2 after.
Prior to even seeing the Rydex data tonight I had a suspicion that we could be in store for some more downside because the market pulled back too much today and didn't do well in the final hour of trading. We may end up filling Monday's gap which brings us back to 1070. We'll see how things look like if we get there.
Perhaps if we see some downside bonds will start acting better and we will get the missing piece of the bullish puzzle I've been harping about.
But let me be clear about something....sentiment is still in good shape from an IT perpective. It suggests any downside action will be limited and likely set up for massive bear trap. Going back to the June-July correction comparision I made last week, we may stillin fact be in a similar senario here except this time instead of a lower low we could see a retest or higher low.
Bottom line: if you have any ST longs I would take them off the table here or put in a tight stop. Again, IT wise we should be fine but untill these rydex jokers unwind their bullishness I won't be going long for any trades...instead I'm going to be looking for short exposure via puts on ABX. Gold stocks may have rolled over here and are leading to the downside. The short exposure is as much a hedge as it is a direct bet on ST downside.
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