From All Star Charts:
The stock market might be making fresh nominal highs, but Wall Street strategists aren’t yet buying into the hype. Historically, this is great for stocks, because sell-side consensus is usually wrong. We look at their stuff as contrarians and shoot to position ourselves in the opposite direction, as long as our risk management procedures allow for it of course.
So when strategists have been extremely bullish in the past, we look at that as a reliable sell signal. The same goes for times when they’re too bearish. This is typically the best time to ignore the pessimism and do some buying instead.
Bank of America Merrill Lynch has a Sell Side Indicator that measures Wall Street’s consensus equity allocation. Their model closed out the year at 47.0, which is still near a historic low. This is telling us that although equities keep melting up, bearishness on equities remains at extremes and firmly in “Buy Territory”, according to…