The recent rally in stocks may be over, Bank of America warns | Techy Kings

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Investors hoping to squeeze more profits out of the stock market’s latest bear market rebound may be too late, according to a team of strategists at Bank of America.

According to a Friday note sent to clients and the media, the bank’s proprietary Bull & Bear indicator has moved from a deeply bearish position for the first time in nine weeks, from 0 to 0.4.

BofA

The green-and-red contrarian indicator is defined by a large arrow in the middle that can move between extreme bearishness – a buy signal for investors – to extreme bullishness, when too much euphoria in the market tells investors to sell.

BofA chief strategist Michael Hartnett credits the shift to increased breadth in equity markets, which means a wider range of stocks have been trending higher, as well as more money flowing into bond and credit markets.

However, since the BofA gauge is often seen as a contrarian indicator, this could mean the latest bear market rally may be over, according to Hartnett.

Thursday saw US stocks post their first straight loss in two weeks after Federal Reserve officials said interest rates would exceed expectations. Stocks have risen steadily from the lows seen since September’s disappointing consumer price inflation reading in mid-October. Investors continued to cheer last week when CPI for October came in weaker than expected.

S&P 500 SPX,
-0.31%
has been on a bumpy ride higher since mid-October when the market got disappointing consumer price inflation (CPI) figures for September.

Read: US stock futures edged higher as Fed rate comments take center stage

The bank’s latest weekly data shows equities have seen the biggest inflows — $22.9 billion — in 35 weeks, and “the chase is on,” Hartnett said.

BofA

The most recent week (ended Nov 16), saw $4.2 billion flow into bonds, $3.7 billion leaving cash and $300 million leaving gold. It was also the 40th consecutive outflow from European stocks, the region’s longest isolation on record.

Last week Citigroup warned clients that they had six weeks to squeeze out a bear market following the inflation shock.

Need to know: A year after the Nasdaq peak, why stocks can rally from here.

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