Bank of America Bull/Bear Indicator Indicates Extremely Pessimistic Bear Market May End in October

The S&P 500 officially entered a bear market on June 13, making it the 20th bear market the index has experienced in the past 140 years. In the crypto market, Bitcoin tumbled more than 60% as a hawkish Fed rate hike and multiple crypto company thunderstorms hit sentiment in the second quarter .

Bank of America Bull/Bear Indicator Indicates Extremely Pessimistic Bear Market May End in October

Meanwhile, a gauge of financial market sentiment, known as the “bull and bear” index calculated by Bank of America, continued to point to extreme pessimism. On June 17, the indicator touched 0 for the first time and remained at that level for 4 consecutive weeks. Pundits agree that a bear market is marked when an index is down roughly 20% from its most recent all-time high, and that bear markets have lasted an average of 289 days throughout history. According to Bank of America analysts, the current bear market is likely to end on October 19, 2022, although history does not fully predict the future.

In a client note, Bank of America strategists led by Michael Hartnett wrote: Commodity yields slowed in Q2 2022 (8.4% vs. 35.0% in Q1)…”inflation shock” consensus, dollar surged ( 6.9%), large losses in government bonds (-9.5%), large losses in cryptocurrencies ( Bitcoin – 58.1%)… “Rate Shock” begins, credit (HY -10.9% vs -6.0%) and equities (-14.6% vs -5.3%) Accelerating losses…”Recession shock” begins; key asset prices H2 = Recession depth taking into account “credit shock” and geopolitical risk”.

This pessimism is best reflected in the outflow of funds. Analysts said global outflows from equities have reached $5.8 billion, with bond outflows reaching $17 billion and another $1.1 billion from gold.

Hartnett stressed that while Fed rate hike expectations have peaked, inflation expectations have not. Hartnett also reminded clients that the likelihood of a recession is rising.

The correlation between cryptocurrencies and other risky assets continues to strengthen as the global macro environment volatile.

Fabio Ackeret, a trader at Crypto Finance AG, said he does not see a breakout in the crypto market anytime soon. “For cryptocurrencies to break out to the upside, all recent events need to settle (UST, Celsius , 3AC),” he wrote in a Friday report .

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Crypto investor sentiment appears to have eased, with the Bitcoin Fear and Greed Index hitting 20 on July 8, the highest it has reached in the past two months.

According to a report published by Arcane Research, the indicator is approaching “fear” levels after a prolonged period of Saw a slight improvement.”

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