No love: Sell side remains bearish


BAML's Sell Side Indicator is on the rise but remains in "extreme bearish" territory, thus continuing a contrarian buy signal for stocks.

The latest read of 53.3% comes against the 15-year average of 60.3%. As long as it remains below 54.4%, the buy signal continues (it's spent about all of 2012 and 2013 there). As comparison, the indicator was in the same low-to-mid-50 area at the March 2009 bottom.

The index tracks back to 1985, and until the last couple of years, sell-side consensus spent very little time in extreme bearish territory. Now it seems to be the norm.

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Comments (7)
  • Brian Bobbitt
    , contributor
    Comments (2083) | Send Message
     
    Well, I often get information on what the contrarians are doing. I have never heard how well they do. I am not sure, but I still feel, following the trend, is the best approach to a novice. Some call it momentum investing. If one buys or sells when he 'feels' it is right, I suppose that is when the most mistakes are made. If one buys or sells after a trend develops, then you, of course, run the risk of missing a short term trade. I feel the most money is made by the old saw, cut a loser and ride a winner. But so often a winner turns quickly into a loser. It is like climbing a greased pole. Most times an investment does well, as you have done your due diligence and found a realistic item moving up in price. About the time you get all your ducks in a row and make the decision, and act, you have; a) missed the start, b) are looking at profit takers any moment, c) may hit a down day on the market after riding up a while and you get a correction which sinks all stocks. But d) is the one you want: for your pick to move up a little more now comes the hard part. When to sell?
    Do it the same way. Simply hang onto a trend until the trend stops. Then, without hesitation, hit the sell button. Yup, sometimes you will sell too early, but if you are selling in profits that is fine. Try to ride the winners, and use stops, or trailing stops. In any case, find a formula which keeps you in as long as possible. Can't hit a homer without a bat in your hand.
    It ain't easy. For now, I am letting a money manager handle it,but I have the right to tell him to get out or whatever. I just may exercise that right soon and get outta Dodge.
    Good luck to all.
    Capt. Brian
    And Again Happy New Year
    The Lost Navigator
    2 Jan 2014, 11:54 AM Reply Like
  • ezrhino
    , contributor
    Comments (266) | Send Message
     
    your experience is refreshing. the 8% IBD stop loss is an hard rule I try to stick to it but sometimes i sell half at 8% because i figure i'm never 100% correct or 100% wrong.
    <Lots of the ibd 50's have high betas and get cut too early
    2 Jan 2014, 12:01 PM Reply Like
  • User 8531481
    , contributor
    Comments (2) | Send Message
     
    I would be very skeptical of the construction of any indicator that equates today with March 2009. IWM has hardly suffered over that period. It bottomed at $35 in 2009 and is now at $114. That is more than a triple in the same period when the SPY has not even doubled. Its problem now is that it got ahead of itself. It is hardly poised for some massive breakout to another double. And if higher interest rates due to a heating economy / less Fed support occur, then small caps will likely suffer and $114-$120 may be the peak for 2014.
    2 Jan 2014, 12:08 PM Reply Like
  • Romeo Fayette
    , contributor
    Comments (88) | Send Message
     
    What's the date of BAML's updated Sell Side Consensus Indicator? Has it not moved from the 1st week of December: http://bit.ly/1ddw6fb ?

     

    I think this data is stale... maybe you want to mention that?
    2 Jan 2014, 12:42 PM Reply Like
  • Dave Dawson
    , contributor
    Comments (4) | Send Message
     
    I agree. Without a date to go with the indicator it is pretty useless
    2 Jan 2014, 02:05 PM Reply Like
  • SpeckledSwan
    , contributor
    Comments (6) | Send Message
     
    How does this indicator match up with the "January Effect"; i.e., the first trading days in January predict the way the rest of the year will go? I believe this is a Stock Trader's Almanac indicator, and it has a realibility of 76.2%, according to the 2014 issue.
    2 Jan 2014, 03:56 PM Reply Like
  • Torahwolfe
    , contributor
    Comment (1) | Send Message
     
    Selling at a set percentage is not correct and will have you selling out winners you will have wanted to keep. Fine a way to track the trend, then stay in. Forget mechanical stops. Specialists can 'take you out when you wnt to stay in. If you are going to trade, manage your trade daily. Have your stop written down and use it if need be. But do stay with the trend.
    3 Jan 2014, 08:35 AM Reply Like
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