Thursday, January 7, 2010

Mutual Fund Cash Levels Do Not Support this Rally


As a group, mutual fund managers are as good a contrarian indicator for the stock market as they come. History shows that they hold relatively high cash levels at the beginning of a bull market. Then at the end of a bull market they don’t have much cash since they’re more or less fully invested.

And if you look at mutual fund cash levels in relation to the S&P 500 over the years, as shown in the chart below, you can easily spot this pattern. (more)

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