Bank of America’s Hartnett believes:
Overall sentiment has surged since June 2020, and the excitement among Wall Street professionals has spiraled out of control...
Ultimately leading to traders' cash levels (i.e., no longer having &#34;off-market funds&#34;) plummeting to record lows, as they shifted all their funds into stocks.
**
Specifically, FMS cash levels dropped from 4.3% of AUM to 3.9%, marking the lowest level since June 2021. (Figure 1)
“FMS cash allocation only represents a significant top for risk assets when close to the December 2024 level (January to March 2002, February 2011),” FMS cash trading rules stipulate that 3.9% = 'sell signal'.
How accurate is this signal? Hartnett wrote, since 2011, there have been 12 previous 'sell' signals, which led to a global stock (ACWI) return of -2.4% within one month of triggering the 'sell' signal, and a global stock (ACWI) return of -0.7% within three months of triggering the 'sell' signal. Therefore, while occasional false alarms occur (all in 2021), most signals led to some very significant sell-offs. (Figure 2)
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/bdf611ab-d06d-4611-9f67-bb7e357fbb2a.jpeg?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/bdf611ab-d06d-4611-9f67-bb7e357fbb2a.jpeg"/>

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Bank of America’s Hartnett pointed out that since June 2020, overall sentiment on Wall Street has surged, leading traders' cash levels to drop to a record 3.9%, which is seen as a "sell signal." This signal, after being triggered 12 times in the past, typically results in a global stock return of -2.4% within one month and -0.7% within three months. Although false alarms do occur occasionally, most signals have triggered significant sell-offs

- Bank of America’s Hartnett notes that overall sentiment has surged since June 2020, leading to an unprecedented drop in traders' cash levels.  
- Specifically, the FMS cash level fell from 4.3% to 3.9% of AUM, marking the lowest since June 2021, with a 3.9% level indicating a "sell signal."  
- Hartnett highlights that previous "sell signals" since 2011 have typically resulted in negative returns for global stocks within one to three months, despite some false alarms in 2021.

The "sell" signal in the US stock market: everyone has bought in!