While the market did little yesterday, Rydex traders greatly increased their net long exposure by both covering shorts and increasing their longs. During the most recent downturn Rydex traders had extremely poor timing. They were very long heading into the downturn and greatly reduced their net long exposure towards the bottom.
Along with the overbought status of the market, this is yet another reason to expect a pullback sometime this week. I do not expect much of a decline this week as the overbought reading is not great. We will get a better overbought reading at the end of trading on Monday. That is because the rally only started in earnest on Monday of last week and not enough time has passed for a good overbought reading.