During May and June, we spent a good amount of time going over the various indicators we watch that use fund flows among the Rydex family of mutual funds.

At the time, it was apparent that those traders were awfully pessimistic, as pretty much all of our indicators were throwing off extreme - even historic - readings of excessive selling.  They hadn't been buying into the subsequent rally all that much, either, but that's beginning to change a bit.

A few of our Rydex indicators are starting to enter "too optimistic" territory, including the one that is essentially a measure of breadth among the funds, the Percentage Of Sector Funds With Assets > Than Their 50-Day Moving Average.

At a current level above 75%, the indicator is now in overbought territory for the first time since April.

Granted, such a move hasn't exactly been a death knell for rally attempts since the bull market began in March 2009, but the S&P has struggled a bit, at least in the short-term, when the indicator has moved to this kind of extreme.  The one time it was able to tack on decent gains, in March/April of this year, those gains were obviously given back.

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