Which Merrill Sentiment Indicator To Believe?

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 |  Includes: DIA, QQQ, SPY
by: Cam Hui, CFA

A former Merrill Lynch colleague pointed out to me last week that the Sell Side Indicator, a contrarian indicator based on the average recommended equity weighting of Street strategists, is edging towards a buy signal:


The record of the Sell Side Indicator has been fairly decent:


On the other hand, Surly Trader also pointed out that the bull-bear ratio based a survey of institutional managers compiled by BoA/Merrill Lynch is flashing a sell signal:


Which sentiment indicator should we believe? It's hard to be a contrarian investor when two sentiment indicators tell completely different stories.

Disclaimer: Cam Hui is a portfolio manager at Qwest Investment Fund Management Ltd. ("Qwest"). This article is prepared by Mr. Hui as an outside business activity. As such, Qwest does not review or approve materials presented herein. The opinions and any recommendations expressed in this blog are those of the author and do not reflect the opinions or recommendations of Qwest.

None of the information or opinions expressed in this blog constitutes a solicitation for the purchase or sale of any security or other instrument. Nothing in this article constitutes investment advice and any recommendations that may be contained herein have not been based upon a consideration of the investment objectives, financial situation or particular needs of any specific recipient. Any purchase or sale activity in any securities or other instrument should be based upon your own analysis and conclusions. Past performance is not indicative of future results. Either Qwest or Mr. Hui may hold or control long or short positions in the securities or instruments mentioned.