The S&P 500 has delivered double-digit gains in 2026, and the rally has outlasted every warning thrown at it so far. One of Wall Street’s most closely tracked positioning gauges is now flashing a different signal.
Bank of America’s proprietary Bull & Bear Indicator has remained in sell-signal territory since May 2026, with July weekly readings ranging from 9.5 to 9.6 on a 10-point scale, Business Insider showed.
Those are the highest levels seen since 2021, driven by extreme positioning across hedge funds, fund managers, equity flows, and credit-market technicals.
“Extreme bull positioning says reduce risk exposure,” Bank of America chief investment strategist Michael Hartnett said in a client note, Business Insider reported.
The signal does not guarantee a decline, and prior sell triggers have sometimes fizzled without producing meaningful losses. But the buyer pool has thinned enough that even modest earnings or policy disappointment can spark outsized selling pressure.
Bank of America’s indicator hits 9.5 as positioning extremes spread across asset classes
The indicator blends institutional positioning, equity and bond flows, global stock-index breadth, and credit-market technicals into one composite score. When that score crosses above 8.0, the firm treats it as a contrarian sell signal for risk assets.
Fund-manager positioning reached the 99th percentile, equity flows hit the 93rd percentile, and hedge-fund exposure registered at the 83rd percentile in Bank of America’s component breakdown reported by Guru Focus.
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Credit-market technicals also came in elevated at the 77th percentile, reflecting tight high-yield spreads and thin risk premiums across global bond markets.
A second threshold fired alongside the indicator, with managers cutting cash reserves to 3.5% of total assets under management in the August Global Fund Manager Survey, down from 3.6% in July and the sixth-lowest reading in the survey’s history since 1998.
That breaches Bank of America’s 4.0% Cash Rule, a sell indicator that confirms institutions are fully deployed, with almost no dry powder remaining.
What 17 prior sell signals reveal about near-term stock returns
The indicator has fired 17 sell signals since its launch 24 years ago, giving investors a meaningful sample of post-signal outcomes to evaluate.
Global stocks, as measured by the MSCI All Country World Index, averaged declines of 2% to 3% in the two to three months following each signal, Hartnett noted.
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Equities fell 60% of those times, and the worst drawdowns reached the 15% to 20% range, Business Insider reported.
The most recent signal complicates that track record. The current sell signal cycle was triggered on May 26, and the S&P 500 has gained 1.6% since then, while the MSCI ACWI has advanced 1.3%, Guru Focus indicated, based on Bank of America’s tracking.
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Morningstar’s momentum data reinforces the crowding concern
Bank of America is not the only major institution flagging stretched positioning. The S&P 500 Momentum Index, which tracks the 100 best-performing stocks in the benchmark, delivered a 34% return between April and May of this year.
That marked the strongest two-month gain since at least 1995, surpassing peaks reached during the dot-com era, Morningstar reported.
Philip Straehl, chief investment officer, Americas, for Morningstar Wealth, told Business Insider that the surge in momentum reflects crowding that has historically preceded weaker forward returns for equities.
<strong>I think it's one signal that there might be excessive optimism in the market today, and so I think it leaves us with a cautious outlook for markets from this point on</strong>
Straehl said measures, including the Shiller PE ratio, price-to-book, price-to-sales, and the equity risk premium, all look extreme. His broader assessment of the market’s outlook: “The overall reward for risk is not really good.”
What the sell signal means for the S&P 500 ETF concentration risk
Investors holding the SPDR S&P 500 ETF Trust (SPY) or the Vanguard S&P 500 ETF (VOO) face a concentration concern that goes beyond general market direction.
Technology stocks now represent roughly one-third of the S&P 500’s weight, and the 10 largest positions make up about 36% to 38% of both funds’ total assets, according to State Street’s SPY and Vanguard’s VOO fact sheets.
That top-heaviness means a positioning unwind would not hit the index evenly. The stocks that drove the rally, mega-cap growth and semiconductors, are the same names Hartnett’s team flagged as most exposed to a reversal, alongside banks and industrials.
How the sell signal reframes the risk inside your S&P 500 index fund
After the S&P 500 peaked in February 2026, the index dropped more than 7% before recovering, a very different post-signal outcome from the small gain that followed the May trigger, Business Insider reported.
A breakdown in market breadth, fewer stocks with the index higher while the rest quietly roll over, is what converts that vulnerability into actual losses. The Bull & Bear Indicator uses breadth as one of its composite inputs.
If the percentage of S&P 500 stocks trading above their 200-day moving average begins to fall while the index holds steady, a divergence emerges. Historically, that signal has preceded sharper drawdowns in the post-signal sample.
Bank of America’s positioning composite and Morningstar’s momentum data arriving at the same conclusion narrows the chance that either one is a false alarm.
For SPY and VOO holders, that divergence is the earliest available evidence that the crowding risk Bank of America flagged is translating into price action.
Related: Bank of America sends strong message to stock market investors
