Fund Managers' Current Asset Allocation - January

There was a notable increase in bullish fund manager behavior over the past month. The highlights from the January BAML fund manager survey are as follows:

1. Cash balances have dipped to a very low 3.8% (4.1% in December 2012), lowest since February 2011. The typical range is 3.5-5%.
2. Equity allocations: a net 51% of fund managers are overweight equities (highest since February 2011). Just 35% overweight in December

Summation Index Climbs Higher

One of the main reasons to remain optimistic on the market is that breadth continues to expand.  Today, $NYSI (the McClellan Summation Index) closed above 700. As the chart below shows, when summation becomes oversold (below -500) and then climbs back above 500, market indices usually continue to climb higher. That is the current situation.

Investors Intelligence: Not Yet Hot

Investor Intelligence survey for this week shows increasing bullishness. The bulls minus bears (lower panel) is approaching 30, an area of two prior peaks in $SPX. Over 35 would be a cause for increased concern. Not yet.

Weekly Market Summary

This is the first post of a new weekly market summary.

Our overall view remains positive. Trend and breadth, the two most important factors, remain bullish. For the 7th week out of the last 8, a majority of indices and sectors closed week >13ema. This week: all 4 indices and 9 of 9 sectors as well $EEM, Euro 350, All World ex-US. Conversely, $TLT <13ema the last 7 weeks.

The main concern is sentiment; it's not hot, but getting warm.

When Is Fund Manager Equity Exposure Extreme?

This is a follow on to the prior post on fund manager cash balance data from the monthly BAML report. This time, we are looking at equity exposure. The charts are from the same article by Short Side of Long found here.

Like cash balance, there is a good signal when investors feel panic near market bottoms. Below 10-15% equity weighting and I will be looking long. Even in early 2008, there was a sizable bounce before heading lower. There were other reasons to ignore this signal later that year.