BofA Urges Profit-Taking After Seven Bear Signals; Crypto Flagged

Bank of America advised clients on June 5 to take profits after seven of its 10 bear-market warning indicators fired. The guidance appeared in a note from Savita Subramanian titled “Too many red flags. Take profits.” Four indicators had fired by March and three more by May. The S&P 500 fell 2.6% the Friday after the note, its largest one-day drop since October.

BofA’s 10 triggers include tighter commercial and consumer lending standards, weakening consumer demand, a boom in dealmaking, and an equity valuation index that ranks stocks as expensive on 17 of 20 measures. The bank’s technical team noted the S&P had lost its 20-day moving average at about 7,442 and identified a key support area around 7,100 near the 100-day average. The S&P reached an intraday record near 7,621 in early June and traded near 7,387 after the note. BofA’s year-end target of 7,100 implies roughly 6% downside from levels at the time of the note.

A separate crypto gauge, the Crypto Canary Composite compiled by a private lab, registered 69.1 inside its warning band before BofA’s note. The reading reflected severe drawdown stress in Bitcoin, a shrinking stablecoin supply and net outflows of cash from crypto markets. Bitcoin’s price movements remained correlated with U.S. equities. Analysts tracking the composite warned the risk window could extend into mid-July but described the signal as suggestive rather than predictive.

Market internals showed concentrated leadership. Growth stocks outperformed value by an unusually wide margin earlier in June, with a z-score that reached 2.89 before cooling to about 1.12. The gap between the regular S&P 500 and its equal-weighted counterpart peaked near 3.67 in mid-May and remained elevated, indicating a small group of large names was carrying much of the index’s gains.

Within technology, the largest AI-related builders were allocating heavy capital to data centers; the four biggest AI builders reportedly spend about $0.71 of every dollar of revenue on data-center investment. Some large tech firms have raised significant cash, including one that sold over $80 billion of securities.

Not all strategists recommended defensive positioning. Michael Wilson at Morgan Stanley described the recent weakness as a healthy pullback within a bullish year-end view. Market participants are watching an upcoming inflation report expected to show U.S. consumer prices rising roughly 4.2% year-over-year for May for clues on the Federal Reserve’s policy outlook and on borrowing costs that affect corporate profits and lending conditions.

BofA set thresholds that would change its outlook: a sustained move below the 7,100 area would validate the downside case, while a resumption above short-term trend lines would reduce immediate risks. The bank framed its guidance as a call to take profits rather than a blanket sell order. The crypto gauge’s warning occurred before the bank’s note; the bank cited concentrated equity leadership and tighter financing conditions among its triggers.