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Over the past 15 weeks we have documented one of the more curious indicators hinting that at least the “smart money” (hedge funds, institutions and private clients) have refused to jump on board the market rally as a result of what is now a record 15 consecutive weeks of selling into the market rally as per Bank of America client data.

Now, according to the same Bank of America, there is “Another sign that Wall St doesn’t believe the rally.” This is what BofA equity and quant strategist Savita Subramanian has to say:

In April, the Sell Side Indicator — our measure of Wall Street’s bullishness on stocks — fell by 1ppt to 51.9, its lowest level in over a year. This was the indicator’s biggest one-month drop in the past two years, as the S&P 500 rallied 15% from the February lows through mid-April. This triggered a contrarian Buy signal in the model for the first time since January. While sentiment has improved significantly off of the 2012 bottom,today’s sentiment levels are still below where they were at the market lows of March 2009. Strategists are still recommending that investors significantly underweight equities, at 53% vs. a traditional long-term average benchmark weighting of 60-65%.

To be sure, since Bank of America makes far more money when the market rises, and when clients buy rather than sell stocks, this was the spin: “to BofA the pervasive bearishness is a “reliable contrarian indicator

The Sell Side Indicator is based on the average recommended equity allocation of Wall Street strategists as of the last business day of each month. We have found that Wall Street’s consensus equity allocation has been a reliable contrary indicator. In other words, it has historically been a bullish signal when Wall Street was extremely bearish, and vice versa.

Then again, now that everyone – even Goldman Sachs – agrees that the marginal, if not only, buyer of equities is corporate buybacks, shouldn’t BofA survey focus more on how much of their own stock corporate Treasurers plan on buying back, and just how “bullish” they are on their own equity-linked compensation, funded generously courtesy of yield-starved IG (and in some cases HY) investors, who don’t care what the “use of funds” is as long as they hit their bogey of outperforming Treasurys for the next few months until the 2016 bonus is paid.

As for whether the “extreme bearishness” this time is bullish for stocks or merely an indication of just how stretched central banks are in their attempt to prop up markets, buybacks and overall investor sentiment, we expect to have the answer in very short notice.

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