Investing.com -- Despite strong technical patterns across U.S. and international equity markets, sentiment data suggests individual investors remain skeptical, according to a recent note from Bank of America analysts.
“The spread between AAII Bullish Sentiment and AAII Bearish Sentiment reached its lowest level since the fall 2023 correction low,” BofA analysts noted, adding that while market trends remain positive, many investors are hesitant to fully embrace the rally.
The firm pointed out that several U.S. and global equity indices continue to exhibit bullish technical setups, but investor skepticism persists.
A key factor contributing to this caution is said to be the continued buildup of cash reserves.
BofA highlighted that “ICI All Money Market Funds Total (EPA:TTEF) Net Assets reached a record high of $6.92 trillion last week,” reflecting what they described as “a mountain of money on the sidelines.”
The analysts acknowledged that while higher interest rates have made cash more attractive as an asset class, persistently high cash levels—despite a more than 70% rally in the S&P 500 since late 2022—have historically been a contrarian bullish indicator.
Technical indicators are seen as remaining supportive of further equity gains. BofA pointed to a “bullish breakout and retest for SPX cumulative net up volume,” which they see as a positive leading indicator for further market upside.
Similarly, they said there were “new highs for the NASDAQ 100 (NDX) A-D line and cumulative net up volume,” reinforcing a bullish outlook.
International markets also show strength, with BofA observing that “global equity index-level breadth remains strong,” as the weekly global advance-decline line of 73 country indices continues to hit new highs.
However, the firm cautioned that this could be a “bullish but maturing signal.”
While technical indicators suggest further gains, the bank believes the persistent caution among investors indicates that the so-called “wall of worry [is] alive and well.”