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Nasdaq 100 Bull/Bear Ratio Highest Since Tech-Wreck

  • Written by Syndicated Publisher No Comments Comments
    December 10, 2010

    And for another confirmation that the Nasdaq is now at the same extreme “irrational exuberance” levels last seen during the dot com crash, we read courtesy of sentimenttrader.com that the Rydex Nasdaq 100 bull/bear ratio is now the highest it has been since just before the dot com crash. “Traders in the Rydex mutual fund family have poured into the Nasdaq 100 long fund at the expense of the inverse fund on the same index.  These traders now have 34 times more money invested in the long fund vs. the inverse fund, which is the highest ratio since the bubble days of 2000 and early 2001.” And what is scarier, is that unlike during the dot com, investors are using leveraged methods to express their exuberance: “The Bull / Bear Ratio for the leveraged funds isn’t quite as extreme…but it’s close (on a relative basis).”

    And some more observations on irrational exuberance v2

    Taking a cue from the Nasdaq 100 chart to the left, this one shows a composite Bull / Bear Ratio for the S&P 500, Nasdaq 100 and DJIA (we don’t have this chart on the site yet).  The ratio neared 3.0 on Thursday, meaning there’s almost 3 times more assets in the long index funds than the inverse index funds.  Since 2004, only two other times approached this level (late February 2004 and November/December 2004).  Other times the ratio approached this level, stocks backed off in the month(s) ahead.

    Hopefully some of this generation’s traders recall what happened when optimism, and outright stupidity, reached such extreme levels back in 2001.

    This article has been republished. To view the original article at www.zerohedge.com please click here.
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