The Fosback Index,was created by Normal Fosback, has fallen out of favor in recent years. but it is a quick and easy tool that belongs in every mutual fund investor’s toolbox.
The Fosback Index measures the cash holdings or liquidity of mutual funds against the normal levels.
Zero = Neutral
Positive = Extra cash. The more positive the more bullish.
Negative = Deficit cash. The more negative the more bearish.
By estimating how much cash the mutual funds should have — compared to how much they are actually holding — based upon current interest rates, positive or negative number is derived to represent the bullish or bearish market forces at play in the mutual fund market.