Chart:  NAAIM Survey Of Manager Sentiment

With tales of retail investors pulling out of the market, we may be in a period where prices are pushed around by computers on one hand, and professionals on the other.

We can't judge the sentiment of high-frequency traders very well, and it wouldn't really matter if we could since they change every couple of milliseconds.  But professionals are another matter, and it's a reason I like the weekly survey from the National Association of Active Investment Managers.

For the latest week, managers upped their long exposure a bit, from just over 20% to just over 22%.  That's still quite low historically.  What's also interesting is that as a group, their confidence in being "not bullish" skyrocketed to 67%.

We compute their aggregate confidence by looking at the standard deviation among responses.  The lower the standard deviation, the higher the degree of confidence among the managers in their net exposure.

This is only the third distinct time they've had less than 25% net long exposure to stocks, and more than 50% confidence in that stance.

It's hard to garner a conclusion from the two precedents.  One was just as the survey began in mid-July 2006, and the other was an extended period during the depths of the 2008/2009 crisis.

Generally, when the exposure of these managers reaches an extreme - especially if there's also a high confidence level at the time - it's a decent contrary indicator.  The current net long exposure of 22% is low, extreme even, but I'd prefer to see something closer to 15% - 20% before becoming too interested in this as a slam-dunk bullish signal for stocks.

Chart:  Ratio Of Assets In Equities Versus Money Market Accounts

The latest release from the Investment Company Institute showed that mutual funds in the U.S. were holding only 3.3% of their assets in liquid investments.  That's a new all-time low, dating back to 1954.

We've discussed this many times over the years.  My contention has been, and continues to be, that we're going to see a new, lower range for this figure than we've seen historically.  But still, when funds are holding barely 3% of their assets in cash, it doesn't leave a whole lot of wiggle room to meet redemptions without selling some stocks, which can feed on itself during a decline.  Perhaps we got a taste of that in August.

What's also troubling is that the data shows there is $6.7 trillion invested in equity mutual funds and exchange-traded funds (including broad-based, sector-based and international).  But there is only $2.3 trillion invested in cash-like money market funds.

The ratio of assets in equities versus cash comes out to 2.98.  Over the past 15 years or so, the ratio has been roughly bounded by 1.5 on the lower end and 3.0 on the upper end.

We're butting up against that upper end now.  The last time it reached this height was in February 2005, and stocks did very well for the next couple of years...before unraveling all of those gains during the subsequent bear market.

And the last "buy" signal when it dipped below 1.5 in October 2008 was early as well, and led to some initial losses before more than making up for it.

This is obviously not a precise timing mechanism.  But it does provide some big-picture context, and by the looks of it, that context isn't very encouraging.  One possible caveat here is that folks could be pulling money out of money market funds due to exceptionally low interest rates, and parking the cash elsewhere.  Unless that "elsewhere" is dividend-paying stocks, this ratio could be a bit misleading and not quite as negative as it appears.