I have shown this graphic repeatedly in the past, but given today’s rally, we might as well trot it out one more time:
The Sell Side Indicator — Merrill’s measure of Wall Street’s bullishness on stocks — rose by 2.8pt in January to 49.8. This is now an eight month high and the fifth time in six months that the indicator has improved after hitting all-time lows in July at 43.9.
The S&P 500 has risen 10% in the six months since sentiment bottomed. Historical returns are typically up 24% and 46% in the 12 and 24 months that follow such as bottom. following.
Bank of America/ Merrill Lynch
Sell Side Indicator, February 1, 2013