late August, there were multiple signs of excessive pessimism, both anecdotally and empirically.

The counter-seasonal rally during September has changed perceptions a great deal, as a 10% rally is wont to do. Even so, I'm not seeing an overwhelming number of signs of too much optimism.

But there are a few.

One example comes from the Rydex mutual fund family. As of yesterday, those traders had 30 times more money invested in the fund that bets on rising prices in the Nasdaq 100 (NDX) than they did in the fund that bets on a move lower in that index. That's one of the highest readings we've seen in the past decade.

On the flip side, "smart money" commercial hedgers (who hold at least 200 contracts and use the futures market to hedge their underlying business) are massively net short the same index, as pointed out in Buzz & Banter earlier this week. These traders have been quite good an anticipating future moves in the NDX, and it has almost always paid to be on their side when positions reached plus/minus $3 billion. And right now they're short nearly $8 billion of NDX futures (we'll get updated figures later this afternoon).



These are only two indicators, but it's not my favorite time to invest when the "smart money" is hugely short and the "dumb money" is hugely long. Which is what we have right now in the Nasdaq 100.