I wrote last night that the sideways action of the past week and a half has helped to work off the overbought reading. Unfortunately, sentiment has become more exuberant during this period and I believe that the market will have a tough time making much progress on the upside as a result. Rydex traders are now positioned about as aggressively as they have ever been. If they are at all representative of how traders are positioned, it will be difficult to find a marginal buyer.
I added to my hedges in the pre-market bringing me back to a modest net long position. When sentiment is this frothy I am happy to miss out on the upside and ensure my hard earned gains are protected.