When yesterday Bank of America presented "Another Sign That Wall Street Doesn’t Believe The Rally" noting that its "Sell Side Indicator, a measure of Wall Street’s bullishness on stocks, fell by 1ppt to 51.9, its lowest level in over a year" it tried to spin this "pervasive bearishness as a 'reliable contrarian indicator'." Alas, for now it is merely an indicator of precisely what it is: that the smart money still refuses to believe the rally, and following a record 13 weeks of smart money selling, overnight BofA reported what is now becoming painfully farcical:
"Last week, during which the S&P 500 fell 1.3% in its biggest weekly decline since early Feb., BofAML clients were net sellers of US equities for the 14th consecutive week, in the amount of $2.8bn. As we noted last week, this has been the longest uninterrupted selling streak in our data history (since ‘08)—previously the longest streak was 12 weeks (in late ‘10)."
Helpfully, BofA's Jill Carey Hall writes that "persistent sales suggest clients have continued to doubt the rally’s sustainability." She is correct, and with the market finally starting to roll over once again as central banks now demonstrate their powerlessness on an almost daily basis, perhaps this time the smart money will finally be right.
BofA breaks down the selling as follows: "net sales continue to be led by institutional clients, while hedge funds and private clients were also sellers. Buybacks by our corporate clients—which are seasonally light in April— decelerated last week, and are cumulatively tracking below levels we saw last April. Net sales last week were in large and mid-caps, while small caps saw net buying."
Breaking down the rolling 4-week data by client type:
- Hedge funds have been net sellers on a 4-week average basis since early Feb.
- Institutional clients have been net sellers on a 4-week average basis since early Feb.
- Private clients have been net sellers of US stocks on a 4-week average basis since early January.
- The four-week average trend for buybacks by corporate clients suggests a pick-up in S&P 500 buybacks in 4Q15, but more recently, a seasonal slow-down.
Looking at the four-week average trends by sector, BofA finds that there has been zero net buying, and notes:
- Net selling: Tech since late Jan.; Staples since early Feb.; Industrials since mid-Feb.; Energy and Financials since late Feb; Materials and Health Care since mid-March; Consumer Discretionary since late March, Utilities since early April.
- Notable changes in trends: ETFs saw a reversal to net selling after net buying since early April; Telecom saw a reversal to net buying after net sales since mid- March.
Maybe next week, which would mark a historic 15 weeks of consecutive smart money outflows, is when the tide finally turns, assuming the market slides here. Or perhaps, due to accelerating redemptions, it won't, and the ongoing selling deluge will continue indefinitely. Find out one week from now.