A Look At Rydex

I continue to be of the opinion that we should see a correction start by next week at the latest and that the correction should reach 1150 on the S&P 500 at a minimum. I don't see a correction being as strong as the one we saw in January. May seems like a better time for a big move down as seasonality becomes a headwind, the stimulus starts wearing off and comparisons become a lot tougher. The caveat is that if the government sells its Citigroup stake I think the current correction could be very large.

The reason I don't believe we will see a correction as large as January's is many indicators are not as stretched as they were in January and this part of the year is seasonally strong. People are shoveling their tax refunds into the stock market, which is why seasonality is in the market's favor right now.

Another indicator that is not as stretched as it was in January is Rydex. Short positions are pretty much as low as they were in January, but long positions are a lot lower. This jibes with what I am seeing anecdotally. The bears are demoralized but the bulls are not thumping their chests the way they were in January.


Anonymous said...

Any opinion on a health care bill passing and it's effect on the markets?

Anonymous said...

I disagree about the tax refund theory. By far the majority of people getting refunds are trying to pay down mounting debt and not putting it into the market.

Tsachy Mishal said...

I believe that news has a lot less to do with market movement than most believe.

If sentiment is very stretched than news of a healthcare bill being passed could tip the market over. But if its not the healthcare bill being passed than some other piece of news that comes along will get credited for tipping the market over.

A few weeks ago when the market was oversold and sentiment was extremely negative no piece of news could have tipped the market over.

Tsachy Mishal said...

Seasonality is strong this time of the year. Thats a fact. I happen to believe it is the tax refunds but the reason is not so important.

Tsachy Mishal said...


Where should I sell JTX?

Tsachy Mishal said...

Im out of JTX at a small profit.

Anonymous said...

JTX to me is a stock going up. But I"ve been very cold lately. I wish I had enough money to just trade stocks only and make a living off that, so I don't have to work and deal with this idiocy . Until I get out with a profit from being short, and then things settle down from the new job with learning all the shit and dealing with bitches that are trying to put the squeeze on the new guy, I won't be doing much stock selection and research.

I made a shitty call on PALM, but I have it in my crosshairs.