Bank of America's Bull Bear Indicator Nears Sell Signal, Triggering Caution

Contrarian Buy Signal for Riskier Assets Faces Uncertainty

The BofA Bull Bear Indicator, a key investor positioning measure, has jumped to its highest level since March 15. This shift in sentiment is reflected in markets, but BofA has highlighted that its indicator has entered "Buy" territory this week.

The indicator ranges from 0 to 10, with below 2 considered a bearish extreme and a buy signal. Currently, the indicator had crept up to a level that could trigger several sell signals.

Contrarian Buy Signal at Risk

A contrarian buy signal for riskier assets is triggered when the Bull Bear Indicator drops under 20. BofA's team said that such a buy signal was coming amid a speedy rally that sent US stocks on a record-setting spree.

However, the recent increase in the indicator suggests that this contrarian buy signal may be at risk. BofA has historically seen a median gain of 5% in the stock market after the indicator enters "Buy" territory, but this may not be the case if the indicator continues to rise.