With The S&P 2% From All Time Highs, Wall Street Bearishness Is More Extreme Than March 2009

One would think contrived confidence would lead to more confidence, and manipulated market record highs would lead in abundant euphoria and market bullishness, a traditional reflexive feedback loop used and abused by central banks the world over over the past century. One would be wrong.

With the S&P500 about 2-3% from all time record highs, a range it has been trading in for the past 7 months...


... BofA says that its "Sell Side" indicator is suggesting Wall Street bearishness is greater than during the extreme selloff in March 2009 when the S&P hit the infamous 666.

In July, the Sell Side Indicator — our measure of Wall Street’s bullishness on stocks — was unchanged at 52.0 for the fourth consecutive month. The indicator remains in “Buy” territory, as Wall Street’s bearishness is still more extreme than at the market lows of March 2009. Given the contrarian nature of this indicator, we remain encouraged by Wall Street’s ongoing lack of optimism and the fact that strategists are still recommending that investors significantly underweight equities, at 52% vs. a traditional long-term average benchmark weighting of 60-65%.

What does this contrived sentiment indicator suggest? "Historically, when our indicator has been this low or lower, total returns over the subsequent 12 months have been positive 97% of the time, with median 12-month returns of +25%. However, past performance is not an indication of future results."

As to how it is determined...

The Sell Side Indicator is based on the average recommended equity allocation of Wall Street strategists as of the last business day of each month. We have found that Wall Street’s consensus equity allocation has historically been a reliable contrary indicator. In other words, it has historically been a bullish signal when Wall Street was extremely bearish, and vice versa. See our December report for more details on the Sell Side Indicator.

Actually, what this "indicator" suggests is that the only reason the market keeps grinding higher is due to central banks: 7 years into the non-recovery, and with everyone selling into the rally except central banks directly or indirectly purchasing risk, and corporations buying back stock, it is hardly a surprise that Wall Street wants "out." that said we can't blame BofA's Savita Subramanian who is desperate to milk the last ounces of this rigged rally: even BofA has to make its soft dollar quotas somehow.