The stock market is seeing a shift in buying behavior, with investors pushing the market closer to overbought levels. Bank of America has declared the “buy” signal dead, citing its Bull & Bear Contrarian Indicator, which has shifted into neutral territory.
The bank’s Bull & Bear Indicator, a contrarian gauge that flashes a buy signal when investors are too bearish on equities, turned bullish in October due to investors’ “extreme bearish” positioning in equities. However, it has now moved into neutral territory, according to BofA.
The bank’s strategists highlighted that the “buy” signal triggered in October has now expired. While other areas of the market, such as US Treasurys, are not overbought, stocks are “getting there,” as 62% of global stock indexes are over their moving averages.
Amid a strong rally in the US equity market, there are signs that equities may not be able to sustain their gains. The S&P 500 surged 9% last month, but inflows into stocks have decreased, and pockets of the economy are showing signs of a slowdown, according to Morgan Stanley.
Despite this, Bank of America has retracted its view of a potential recession in the economy and has raised its bets on the stock market in 2024, predicting that the S&P 500 could reach a fresh all-time high by the end of next year.
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