Chart of the Day - US Stocks: Only private clients remain confident in sustained rally

"Well, I think we tried very hard not to be overconfident, because when you get overconfident, that's when something snaps up and bites you." - Neil Armstrong 

We recently took the liberty of plotting not only the rise of the S&P index (blue) versus NYSE Margin debt (red) but we also added S&P EBITDA growth (yellow) as well as the S&P buyback  index (green) since 2009 - graph source Bloomberg:

But the Chart of the Day is no doubt Bank of America Merrill Lynch's client cumulative net buys of US stocks since January 2008. So much for the vaunted "great rotation" story...

"Last week, during which the S&P climbed 0.7% to another new all-time high of 1692, BofAML clients were net sellers of US stocks for the second consecutive week. Large, mid and small caps all saw outflows. By client type, net sales were led by institutional clients, who have sold US stocks for the past five weeks. Net sales by this group were the largest since March, and the sixth-largest in our data history (since 2008). And on a four-week week average basis, outflows by institutional clients are the largest in our data history. Hedge funds were also net sellers for the second week in a row, while private clients bought stocks for the eighth consecutive week. 

While private clients’ cumulative net buys of equities year-to-date are entirely due to ETFs, this group has been a net buyer of single stocks in seven of the past eight weeks. The last time this occurred was amid the market correction following the US credit rating downgrade in August 2011. In our view, continued purchases of single stocks by this group would suggest ongoing confidence in the bull market, as this group has largely shunned single stocks over the last four years." - source Bank of America Merrill Lynch.

As fellow blogger Cam Hui aptly concluded in his recent post entitled "Can the US-decouple?" on Humble Student of the Markets:

"My inner investor is far more concerned as these longer term indicators suggest that US equities may be nearing an inflection point. The risk-reward picture is turning negative and he doesn't want to stick around at the party until the very end when the cops raid the place. He reminds my inner trader of that old Wall Street adage, "Bulls make money, bears make money, but hogs get slaughtered.""

Are private clients ready for the "slaughterhouse"? We wonder... 

"I have great faith in fools; self-confidence my friends call it." - Edgar Allan Poe 

Stay tuned!