Key Indicator Flashes Rare ‘Buy’ Signal. But There Are Caveats

Key Indicator Flashes Rare ‘Buy’ Signal. But There Are Caveats

For the first time since the depths of the original pandemic selloff, a widely-cited indicator of market sentiment flashed a rare green light. But there are caveats. Quite a few of them, actually. After teetering on the brink of "extreme bearish" territory for weeks, BofA's Bull & Bear Indicator triggered just the ninth contrarian "buy" signal in nine years (figure below). The dip below 2 (the threshold) came as fund manager cash levels surged to the highest since Lehman, while equity f
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3 thoughts on “Key Indicator Flashes Rare ‘Buy’ Signal. But There Are Caveats

  1. This looks like a short-ish term trading indicator. It flashes “buy” about once a year on average; looking at down market periods, it is more often than that. The returns are measured over a short time, 1 to 3 months.

    Is it plausible that the SP500 will return positive over the next 1, 2 or 3 months? Sure, maybe. Estimates are still going up, 1Q earnings should be ok, consumers who have money are gearing up for a Covid-free (they think) spring, no Fed action for two months, the war could (likely) end soon-ish, etc.

    Then we’re in May.

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