Back on January 11, I wrote about the Rydex Nova/Ursa ratio. You may recall that The Nova Fund is a bullish fund that attempts to move 1.5 times the S&P 500.
The Ursa Fund is a bearish fund that attempts to track inversely to the S&P. The ratio gives us an indication of the bullish sentiment towards the overall market. The higher the ratio, the more bullish investors are.
Back in January, I talked about how the ratio had peaked in December at 0.713. Since that time, the ratio has turned in a series of lower highs.
On February 2, the peak was 0.704. On February 15 and 17, the ratio peaked at 0.685.
What this series of lower highs tells us is that even with the market moving higher for the first month and a half of 2011, the buying power and the bullish sentiment are waning.
On the opposite side of this pattern, in July 2010, the ratio put in a double bottom right as the market was preparing to take off on an incredible eight-month run that saw the S&P gain 33 percent.