BofA's contrarian 'Breadth Rule' triggers buy signal

By Alexander Bueso

Date: Friday 24 Jun 2022

BofA's contrarian 'Breadth Rule' triggers buy signal

(Sharecast News) - Another one of Bank of America's contrarian equity strategy indicators moved into 'buy' territory over the past week, the investment bank's analysts said.
BofA's Global Breadth Rule triggered a buy signal on 21 June, strategists led by Michael Hartnett said in a research note sent to clients, as 88% of equity indices were now trading below their 200-day and 50-day moving averages.

In parallel, BofA's Bull & Bear indicator remained at 'maximum bearishness' at a reading of 0.

Historically, three-month returns following readings of 0 were "very strong" unless a so-called 'two standard deviation' event, such as the 2002 double dip recession or the 2008/11 systemic event occurred, they explained.

Nevertheless, BofA's private clients had shown a marked preference for "yield" and "defence" themes over the preceding weeks.

Hartnett and strategist Myung-Jee Jung also highlighted how year-to-date the 'capitulation' had in fact been seen in bonds, not stocks.

Since the start of the year, investors had ploughed $200bn into stocks and pulled $190bn from bonds, they said.

And the defensive theme had continued over the preceding week, with investors putting $10.8bn into cash and $0.6bn into gold, while yanking $16.8bn from stocks and a further $23.5bn from bonds.

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