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Stocks , Investing

This Stock Market Ratio Goes “Crazy” at 62X (Another is Even “Crazier”)

“It dwarfs anything in the past”

by Bob Stokes
Updated: December 30, 2021

Time-tested technical indicators are highly useful to investors.

Yet, a stock market investor can arrive at an even higher confidence forecast by combining technical analysis with the message of sentiment measures.

Likewise, it's good to combine near-term analysis with a bigger picture perspective.

With that in mind, let's look at the past 20 years of a couple of related sentiment measures.

This chart and commentary are from the December Elliott Wave Theorist:


The middle graph is the ratio between the amount of money that Rydex investors have put into bullish funds versus bearish funds. Look toward the left, and you'll see the words "normal range."

In the old days, that is, 15 years ago, the ratio was around 1:1 or 2:1. It was a fairly even split. People are generally more optimistic than pessimistic, so in general there was a bit more money in bull funds than in bear.

Investors have been going crazy in the last five years. On November 19, the ratio reached 62:1. That's right: There is 62 times as much money in the bullish stock funds at Rydex than in the bearish stock funds.

Believe it or not, that's not even the craziest indicator on this chart. Look at the bottom graph, which depicts the ratio of leveraged bullish funds versus leveraged bearish funds. It shows that there is 82 times as much money in the leveraged bullish funds as there is in the leveraged bearish funds.

That is incredible. It dwarfs anything in the past.

Relatedly, a Dec. 3 Barron's headline said:

'Margin Debt' Is Rising. It's Becoming a Risk for Stocks.

On Dec. 20, another Barron's headline said:

The Good News as Stocks Plunge? Cash Is Pouring Into Equity Funds.

Does this extreme in bullish sentiment foretell a major stock market reversal?

The Elliott wave model and an array of technical indicators offer big clues.

Get the insights that will help you to navigate 2022 by following the link below.

“We Have Reached Levels We Have Never Seen Before.”

The title is a December Elliott Wave Theorist quote, which also describes the juncture which the stock market faces as one "for the ages."

The evidence is clearly laid out in the December Theorist -- which is a "must" read.

If you would like near-term stock market analysis -- along with the big-picture analysis presented by the Theorist -- you are encouraged to review our flagship investor package.

It's called The Financial Forecast Service and provides near-term, intermediate and a big-picture perspective.

Choose what fits your needs by following one of the links below.

Elliott Wave Theorist


Robert Prechter, Elliott Wave International's founder and president, has been publishing the Theorist continuously, every month, since 1979. Stocks, bonds, credit, debt, inflation/deflation, social trends... the topics you'll see in the Theorist vary. Each month, Bob picks the subject areas subscribers most need to read about right then.

That is what makes each new issue a must-read for every investor, trader and economy-watcher.

Financial Forecast Service


All month long, Financial Forecast Service helps you stay ahead of the waves in the U.S. markets on the timeframes that matter the most. FFS covers the stock indexes, bonds, gold, silver, the U.S. dollar, as well as market psychology and cultural trends. It is our most popular service.

Comprises the monthly Elliott Wave Financial Forecast, 3x-per-week Short Term Update and at least 12x-per-year Elliott Wave Theorist.

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