Source: CritpoTendencia Original Title: Bank of America Bull & Bear Indicator Signals Sell Due to Excessive Euphoria Original Link:

Bank of America Bull & Bear Indicator Signals Sell Due to Excessive Euphoria

Markets rarely warn when risk is building up, but some historical metrics act as thermometers of excess. The Bank of America Bull & Bear Indicator is one of them. And today, it is sending a clear signal: SELL.

The indicator reached 9.3 points in January 2026, one of the highest levels recorded so far this century. It is not a neutral or ambiguous zone. Historically, values above 8 points have coincided with moments of extreme euphoria, where the market prices in almost perfect scenarios.

This is not about a specific prediction, but a warning about risk asymmetry. When all market components align in a very bullish mode, the margin for positive surprises is drastically reduced.

A level not seen since 2018

The last time the indicator reached a comparable zone was in February 2018. At that time, after the sell signal, the S&P 500 fell nearly 12% in just nine trading sessions. It was not a recession, but a violent correction that caught many aggressively positioned investors off guard.

The current reading is even more extreme in some components. The chart shows that all internal metrics of the indicator are in bullish or very bullish territory, which has historically preceded correction or consolidation phases, not necessarily due to economic deterioration, but due to saturation of expectations.

These types of signals do not aim to pinpoint the exact day of the turn, but to alert about an environment where risk is no longer well compensated.

Cash disappears from the radar

One of the most striking data points comes from the Fund Manager Survey (FMS). Cash levels in portfolios fell to 3.3%, the lowest recorded in history. In simple terms: professional managers are almost all-in.

When cash disappears, the market loses its main defensive cushion. There is no available liquidity to cushion unexpected shocks, and any negative event — no matter how small — can be amplified.

This phenomenon does not imply that the market must fall immediately, but it suggests that complacency is high and that the balance is fragile. In these contexts, corrections are not usually announced by weak macro data, but by abrupt changes in sentiment.

Is a correction approaching?

The question is not whether the market is strong. The data show that it is. The real question is whether it is already too convinced of that.

With the Bull & Bear Indicator at extreme levels, cash at historic lows, and clear precedents in recent past, the current scenario invites more strategic caution than euphoria.

The signals do not say to run for the hills, but they do warn that the margin of error has shrunk. And when consensus is total, the market often seeks imbalance on the least expected side.