A contrarian ‘buy signal’ for stocks has been triggered after waves of selling
- Bank of America Merrill Lynch said in a research note Friday that its flagship sentiment indicator had tumbled from 2.4 to 1.3 and triggered a contrarian “buy signal” for risk assets.
- A reading below 2 on its “bull and bear indicator” is classed as extremely bearish and causes the buy signal to flash.
- The bank said this week’s drop had been due to outflows in emerging market debt and equities, as well as a rapid rally in Treasury markets.
Bank of America Merrill Lynch, using fund flow data from EPFR, said another $12.4 billion of cash flowed into bond funds and $1.9 billion into gold in the week ending Wednesday. Meanwhile, $7.6 billion in cash left equities which took the year-to-date outflow total to $204 billion.
"It's better to be out wishing to be in... than to be in wishing to be out!
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