Bank of America told clients to take profits after seven bear signals flashed. One crypto gauge, at 69.1, sent an earlier warning. The S&P 500 sits between a record and key support.
Bank of America told clients to take profits. Seven of its ten bear-market signals are flashing – the exact count that has preceded every S&P 500 downturn since 1990. One crypto gauge fired even earlier.
The warning came in a June 5 note from Savita Subramanian, the bank’s head of US equity strategy. Its title was blunt: “Too many red flags. Take profits.”
BofA tracks ten conditions that usually appear before markets peak. Four had fired by March. Seven by May. The S&P 500 fell 2.6% that Friday, its worst day since October.
The triggers include tighter bank lending, gloomy consumers, a dealmaking boom, and an index that screens expensive on 17 of 20 measures.
Subramanian wrote that the bank sees opportunity in individual S&P 500 stocks – not the cap-weighted index. In plain terms, stocks are priced for perfection, a few giants carry the market, and money is getting harder to borrow. That mix has ended badly before.
The earlier warning came from the Crypto Canary Composite. The gauge reads 69.1, inside its warning band. Bitcoin’s drawdown stress is at maximum. Stablecoin supply is shrinking. Cash is leaving crypto. Bitcoin still trades in step with stocks, so the stress can spread to equities, the composite’s data show.
Historically, this composite has triggered two to six weeks before stock market tops. If the pattern holds, the risk window runs into mid-July. The signal is suggestive, not predictive.
Expensive stocks are beating cheap ones by a rare margin. The gap between growth and value hit a z-score of 2.89 in early June. Readings above 2 are uncommon. It has since cooled to 1.12, which could signal relief or the start of a larger unwind.
Leadership is narrow. The regular S&P 500 ETF (SPY) versus its equal-weighted twin peaked near 3.67 in mid-May. It now sits at 3.52, just above its 200-day average. A close below would hand leadership to the average stock – the trade Subramanian prefers.
Tech cash is the third strain. The four biggest AI builders now spend about 71 cents of every dollar they earn on data centers. Amazon spends more than it makes. BofA sees the group near 100% by year-end, when buybacks stop and share sales start. Alphabet just raised over $80 billion.
The S&P 500 topped near 7,621 in early June and now trades near 7,387. It has lost its 20-day average at 7,442 – the first crack in the trend. BofA’s 7,100 target is the line that matters. It sits beside the 100-day average at 7,082 and chart support at 7,110. That is the bulls’ defense.
Not everyone agrees. Morgan Stanley’s Michael Wilson calls the pullback healthy within a year-end bull case.
AlphaScala’s proprietary data rates Bank of America’s stock at 65/100, a moderate score, and SPY at 39/100, reflecting the mixed signals. The BAC stock page offers further detail.
The first test of the stock market warning comes fast: an inflation report expected near 4.2%. The index sits between the 7,621 record and the 7,100 line. Whichever breaks first settles it.
Prepared with AlphaScala research tooling and grounded in primary market data: live prices, fundamentals, SEC filings, hedge-fund holdings, and insider activity. Each story is checked against AlphaScala publishing rules before release. Educational coverage, not personalized advice.