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Stock Sell Signal Looms: BofA Indicator Nears Red Zone
2 Oct
Summary
- Bank of America's Sell Side Indicator is close to a sell signal.
- Extreme bullishness on Wall Street triggers the indicator's sell signal.
- Historically, a sell signal has preceded negative S&P 500 returns.
A significant market indicator from Bank of America is approaching a critical sell signal. The Sell Side Indicator, which gauges Wall Street sentiment, is just 0.3 percentage points away from entering its 'sell' territory as of September. This reading is the highest seen since March 2022, signaling extreme bullishness among analysts.
Historically, this indicator has proven to be a reliable contrarian tool. When it has flashed a sell signal, the S&P 500 has shown weaker performance in the following 12 months. Analysis shows that with the indicator at or above current levels, the benchmark index has seen negative returns 36% of the time. This comes as rising bond yields and concerns about economic conditions are making more forecasters cautious about stock market performance.
