Zeev's Turnips Patch-No Politics (ZEEV)

[Gizmo]

Decision Point tracks actual cash flowing into and out of Rydex mutual funds, and, while cash flow normally runs parallel to price, divergences can often appear ahead of price reversals.

Back in December I wrote an article on the Rydex Precious Metals Fund showing how rising prices and negative cash flow will usually result in a price correction. Now we have a situation where cash flow into the Precious Metals Fund has been flat and now positive, while prices have been falling like a rock. This indicates that bulls are trying to hold their ground and that accumulation of precious metals shares has been taking place. The end result will probably be a rally in precious metals shares.

While a longer-term rally could ensue, my observation is that these cash flow divergences only have short-term implications. Also, it is important to remember that the Rydex Precious Metals Fund only accounts for a small slice of the total market in gold stocks, and this small picture may not be representative of the big picture.

--Carl Swenlin

- Taken from the Decision Point Website