There may be trouble ahead for stocks. Bank of America’s Bull & Bear indicator, a gauge of sentiment in markets, rose to 8.5 this week, from 7.9. That puts it in “extreme bullish” territory and signals investors to sell. These indicators are not to be taken lightly. BofA strategist Michael Hartnett pointed out that this measure has flashed a sell warning 16 times since 2002. Subsequently, the MSCI All Country World Index has fallen by 2.4% on average in the next two months, while the S & P 500 averages a 1.2% decline. .SPX YTD mountain SPX year to date Stocks have struggled lately as investors worry about valuations on artificial intelligence-related names. The S & P 500 is down 1.1% in December, on pace to snap a seven-month advance. The S & P 500 tech sector, the biggest by market cap weighting, is down 2.5% month-to-date. Yet, the S & P 500 remains 15.2% higher for the year and set a record closing high earlier this month. On top of that, inflows into equities remain strong. Hartnett noted that equity ETFs raked in $145 billion this week, a record. Money flowing into U.S. stocks alone reached $77.9 billion, the second-most ever. But if BofA’s track record is any indication, along with the S & P 500 struggling to stay above key technical levels, investors may want to at least pare positions heading into the new year.
