Bank of America (BofA) team of stock market strategists pointed out that the current optimistic atmosphere on Wall Street for U.S. stocks has fled to the level that the stock market may be in big trouble. Bank of America team pointed out that “we found that the bullish atmosphere on Wall Street is a reliable inverse indicator”.
Bank of America compiled bullish indicators rose nearly 1 percentage point on Feb. 28 to 59.2 percent, just 1.1 percentage points short of the sell signal point of 60.3 percent. Bank of America pointed out that, from historical experience, the current high bullish stock market indicators, has been close to the “bear market” approaching the level.
Bank of America’s stock market team pointed out that this indicator is to assess the average shareholding of sell-side experts recommended, and the current indicator level is very close to the “sell signal”.
Bank of America pointed out that the last Time this indicator was this close to a “sell signal” was in June 2007, and this level predicted a negative 13% return on investment in the stock market over the next 12 months; with the current level of the indicator, the return on investment in the stock market in the next few years will be lower than the average level over the years.
The Bank of America team pointed out that, based on the current optimism, the U.S. stock market investment return for the next 12 months is only 7%, which is lower than the average 12-month return of 16% since the financial tsunami.
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