in conjunction with jason goepfert analyze the inflation-adjusted mutual fund cash level.
The mutual fund cash level is no longer neutral. This new adjustment shows that on aggregate, mutual fund managers are holding about 1.5% less cash than the statistical model suggests. While that may seem a trifling difference, historically, it has been a tell for a topping market.
The data fits the market remarkably well. The only caveat is that as timing indicators go it is sloppy. The market may top now, a week from now or a bit longer. With the corollary that the amount of cash may decrease even further. But the message of this indicator is crystal clear: the market is top heavy.
Labels: economics, markets