A contrarian signal just flashed and is warning traders that it could be time to get out of the stock market, or at least limit exposure. Investors are flooding out of cash to buy stocks, with collective cash levels dropping to 3.9% of portfolios, from 4.3%, according to a widely-followed survey of fund managers from Bank of America Securities. The firm considers a drop below 4.0% aggregate cash levels as a sell signal. The median 4-week loss after the sell signal is triggered has been 1%, according to the bank’s review of 24 sell signals going back to 2011. The worst loss in that time has been 29%, while the best gain was 4%. “Bull capitulation almost complete,” Michael Hartnett, investment strategist at Bank of America Securities, wrote on Tuesday. “Early June ripe for profit-taking, bond yields to determine degree of pullback.” On its face, it sound like a bullish signal when investors buy stocks en masse. After all, stocks have surged since their March lows, soaring roughly 19% and the S & P M500 above 7,500 last week for the first time ever, fueled by renewed optimism over artificial intelligence. Global semiconductor companies and the Magnificent Seven companies led the way. But low cash reserves signal a “bull capitulation,” meaning traders chasing the stock rally will soon …
