A "Frothy", "Overbullish", "Overbought", "Overmargined" Market With "Not Enough Bears" - In Charts

Tyler Durden's picture

Last week, Bank of America warned that "it's getting frothy, man" based on the sheer surge of fund flows into equities. Here is the same firm with some other observations on what can simply be described as a "frothy", "overbought", "overmargined" market with "not enough bears."

From Bank of America:

"Daily slow stochastic is generating an overbought sell signal."

"Based on the American Association of Individual Investors (AAII) Bulls to Bears ratio investors are more bullish now than they were in late May and mid July. In terms of sentiment, this is a contrarian bearish condition. Since April, near-term peaks and troughs in AAII Bull/Bears have coincided w ith near-term market peaks and troughs."


Bears drops to 16.5% = too few bears;  As of October 25, Investors Intelligence (II) % Bears extended deeper into contrarian bearish territory below the 20% level with a reading of 16.5%. This is down from 18.5% the prior week and the lowest level for II % Bears since April 2011 – this suggests too few bears among new sletter writers. II % Sentiment is an equity market risk and confirms the complacent readings for the 5-day put/call ratios.

NYSE margin debt at record high; confirms S&P 500 high; As of September 2013 NYSE margin debt stood at a new record high of $401.2b and exceeded the prior high from April of $384.4b. This confirms the new S&P 500 highs and negates the bearish 2013 set up that was similar to the bearish patterns seen at the prior highs from 2000 and 2007, where a peak in margin debt preceded important S&P 500 peaks.

Risk: Net free credit at $-111b & back at 2000 extremes; Net free credit is f ree credit balances in cash and margin accounts net of the debit balance in margin accounts. At $-111b, this measure of cash to meet margin calls is at an extreme low or negative reading not seen since the February 2000 low of $-129b. The risk is if the market drops and triggers margin calls, investors do not have cash and would be forced to sell stocks to meet the margin calls. This would exacerbate an equity market sell-off.

Then again, do any of these technicals matter? Of course not: only the size of the Fed's balance sheet does.

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elephant's picture

How many of these bear newsletter writers are just psych-ops putting out bad intel to rope in bears for the man?

Running On Bingo Fuel's picture

How long have you been here? lol.


Carl Popper's picture

Too long apparently lol. The tinfoil is thick on this one, but I like him.

Running On Bingo Fuel's picture

Oh ok, if you like him then I like him. It's a universal constant.


But let's not tell anyone we're teaming up. Mums.

SheepDog-One's picture

What I'm stumped by is after 4 years of short squeezes daily how there can be any 'bears' left at all, not living under a bridge anyway.

Running On Bingo Fuel's picture

Have you checked the commitment of traders report. The shorts are living in ivory towers.


Let's keep the froth in our morning Grande Double-Caf Llatte Soy Ristretto Frappuccino Macchiato Frappuccino bowel shaking Mocha Thunder Thigh Zebra, With Legs.


icanhasbailout's picture

That's my question as well. After the Fed has demonstrated such commitment to throwing everyone and everything under the bus in the name of inflating stock markets, it would be insane for anyone to bet their hard-earned cash against the printing presses.

runforthehills's picture

:) interesting post when steve suttmeier of BofA ML put out a bullish technical report on Friday entitled “Game On for Risk-on” 

a classic example of a sell-side shop marketing one idea and its opposite at the same time

aint no fortunate son's picture

Interesting that he mentioned the double back-to-back 90% UP days at the start of this year on the first chart. That's an indicator developed by Marty Zweig many years ago and very bullish (for awhile anyway). We also had double back-to-back 90% up days on the first two trading days in 1987 when I was a rookie broker... just sayin lol!

moneybots's picture

"Bears drops to 16.5% = too few bears"


Except when there is QEternity.  Even zero bears isn't a contrary indicator with QEternity.

Whatta's picture

what I keep telling everyone....

...that reality now is "reality". play the game with them until it changes. then reality will return.

Julian's picture

Unfortunantely your assumption that you will have time to rationally adjust your position in an orderly and profitable way is flawed - you will be run over with the rest of them when the market just stops and reopens 60% lower...

Black Forest's picture

The past is gone.

CHX's picture

On a tear, and will end in tears.

CHX's picture

no worries, the plunge protection team will cash in on their shorts put on on during the false-flag almost war top, cash in and go long before it breaks below ~90

Running On Bingo Fuel's picture

~$83 will be the CL low. Point being, unleaded is low, heating oil is low, natty is low. Santa is going to stuff some stockings this year and errbody is going to sit around the xmas tree spinning their new shiny dreidel's and listening to Christmas In Hollis sung by Barry H Obama.


moneybots's picture

"this suggests too few bears among new sletter writers."


How can anyone be bearish at 85 billion a month, with double down Yellen on deck?

observer007's picture

Never Seen Before Evidence – 9/11 – The “Hidden Airport in Masonic Footprint”


Despite all the previous arguments and evidence presented to date that clearly shows the American government’s own official storyline on what had happened on 9/11, is far from true


GrinandBearit's picture

There are very few humans trading this market today.

95% of the trading is done by Skynet.

Running On Bingo Fuel's picture

I agree!

And if you trade against skynet, you will be ASSimilated.


Carl Popper's picture

But where is the pin to pop it? I don't see one in the next few months. The bull may still have legs.

xamax's picture

Lot of upside room here....my target on s&p is 1900 by year end

xamax's picture

...and my 2 core holdings NFLX /TSLA will even do better , hehehe
Could be bingo for xmas

yogibear's picture

Effectively the bears have been shut down and became bulls.

olto's picture

When the bears are gone

The bulls will race over the cliff

Always been like that

yogibear's picture

Guess the bears are getting tired  of being squeezed  by the HFT and algos looking to get ever more money by setting up the shorts and bidding it up with unlimited QE money.



xamax's picture

Having said that, one must catch an eye on the exit, guess March/April 2014.....

xamax's picture

Year end Rally starts tomorrow.... WOOHOOOO

SheepDog-One's picture

'Bears' and 'bulls'....SO 1990's!

Stoploss's picture

What the hell is a bear?

olto's picture

Sorry, Stoploss,


You probably know it as a "bare".

I apologize for the confusion

yogibear's picture

No Shocktober. A time to jump on and ride the huge end of the year rally freight train.

Fund managers want their nice fat bonuses.

chump666's picture

Smells like a rogue trade is due, either a machine goes bonkers or someone gets very greedy on a over-margined bet. 

Could set off the end.  Could...

I believe chaos always has the last laugh and the magicians ain't that smart.

Being Free's picture

When your lost in a fog it is best to sit and conserve your resources and wait for the fog to lift than wander aimlessly.  Hope is not a good strategy.

q99x2's picture

All old school BS.

You now have a buyer of last resort, who happen to also control the software that controls the indexes. They are known as The Federal Reserve and have destroyed capitalism and the freedom of the individual and replaced it with fascism. Effectively they have taken over the Washington D.C. based federal government of the United States of America. They are also funding the CIA and NSA in a covert war to take over the world. 

Coast to Coast AM with John B. Wells had a 76 year old whistle blower, CIA pilot Robert Plumlee. He worked flying clandestine flights from Castro to recent times. Additionally other pilots expressed to him things about Benghazi and other operations. Pretty much showed chronologically haw the CIA became a separate organization from the United States of America and was used to take over many countries as well as Washington D.C.

All peoples around the world are turning against the banking cartels and their criminal Gestapo and Washington D.C. We want the war crimes to stop. M'Fers.

I think I heard him say that Plumlee is part of an ongoing investigation in Washington D. C. at this time..

El Hosel's picture

Bulls, Bears, Bots, Bankers... Fuking market goes straight up for 5 years. Once in a while the Riggers fumble around for a few days as the market tries to correct, only to be propped  back up within a few days, hours, minutes. The charts look "man made" because they are, the VIX looks disconnected because it is, the volume looks light because it is."The Market" looks like history because it is. 

Now that everybody knows this "new normal market" can't go down fund flows are way up? Gee Wally, why wouldn't they be?

polo007's picture


The total value of stocks around the world recently rose above $60 trillion for the first time since 2007 – and central banks like the U.S. Federal Reserve have played a big role in that rise by buying bonds and other assets to stimulate economies and provide cheap money.

Market investors are obsessed with the issue of how long this stimulus — much of which is called “quantitative easing” — can continue.

On Friday, U.S. Federal Reserve chairman Ben Bernanke is expected to speak on a panel at the International Monetary Fund, and China’s Communist Party will stage the third plenary session of the central committee on economic policy reforms on Saturday.

Central banks around the world, including the European Central Bank and the Bank of England, are expected to make key announcements on interest rates throughout the coming week and edgy investors will pay forensic attention to the language of their public statements for any clues to future policies.

The role of the central banks in markets has taken on new importance.

In the last five years since the 2008 financial crisis, the total assets of the world’s major central banks are estimated to have more than doubled to roughly $15 trillion. That’s equal to a quarter of the current value of global shares.

World stocks lost roughly $30 trillion in market capitalization after the 2008 crisis — but have bounced back by doubling in value during the past four or five years thanks partly to the stimulus measures of the central banks.

U.S. stocks climbed recently to record highs after the Federal Reserve surprised markets by deciding not to reduce or “taper” its $85 billion-a-month bond buying stimulus measures – for now.

Looking forward, it seems that every economist or financial analyst has a different view on when — or if — the Fed will begin to reduce its stimulus, and investors remain edgy about the prospect of the stimulants being taken away.

It has rarely been so important for the central bankers of the world to mind their language.

$60 trillion of the public’s wealth is riding on those words.

d edwards's picture

"Would you like froth on your latte, sir?"  ;-)