Sell Side Still Bearish on Stocks, Which is a Good Thing

There is still more upside in stocks, according to a new BofA/Merrill Lynch's contrarian Sell Side Indicator report.

The indicator, which is a measure of Wall Street’s bullishness on stocks, rose for the third consecutive month in October to a seven-month high of 52.4 from 51.8 the prior month. However, the indicator remains in "Buy" territory, as Wall Street's bearishness is still more extreme than at the market lows of March 2009.

"Given the contrarian nature of this indicator, we remain encouraged by Wall Street’s ongoing lack of optimism and the fact that strategists are still recommending that investors significantly underweight equities, at 52% vs. a traditional long-term average
benchmark weighting of 60-65%," equity and quant strategist Savita Subramanian said.

Historically the Sell Side indicator has been a reliable contrarian report. "In other words, it has historically been a bullish signal when Wall Street was extremely bearish, and vice versa."

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