"We Took Out The June 2007 Highs": Morgan Stanley's Sell Signal Just Hit An All Time High

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For the past several months, Morgan Stanley's fundamental analysts have been turning increasingly bearish on stocks, with the pessimistic sentiment plateauing earlier this week when chief equity strategist Michael Wilson said that there is far too much optimism in the market, and that while earnings are slowly rising, forward PE multiples are far too high and are set to slide, with "the de-rating about 75% to go or an approximate 15% decline in P/Es from here." As a result, in Wilson's view - which is rapidly emerging as the most bearish on Wall Street - "earnings revisions will not be able to offset that de-rating, leaving the overall market vulnerable to a 10-15 % correction over the next 6 months."

It now appears that Morgan Stanley's fundamental bearishness has spilled over into the bank's technical analyst team and as the bank's chief Euro equity Strategist Matthew Garman writes, for only the fifth time in over 30 years, each of Morgan Stanley's five market timing indicators are giving a sell signal at the same time.

Not only that, but the bank's Combined Market Timing Indicator - which has been in sell territory since March - just hit a new all time high of 1.19, surpassing the previous record high seen in June 2007, right around the time of the first great quant crash and before the market collapsed.

According to Garman, the only time equities have risen after a "Full House" Sell Signal was in February 2017, shortly after the Shanghai Accord kicked in to prevent a global recession. The other previous occasions where there was a "Full House" Sell Signal were March 1990, May 1992, June 2007. According to MS, "in the 6M post the initial Full House Sell Signal, MSCI Europe has fallen on average 6%."

So with every in house risk indicator screaming sell, does that mean that Morgan Stanley will have the guts to tell its clients to sell? Why of course not, because in this market where stuff like the AMC, GameStop and Bed Bath & Beyond squeezes force analysts to admit they no longer have any idea what's going on.

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