Contrarian Indicator

Now here's the first really cheerful news we've heard from the stock market in quite a while: Big institutional money managers are miserable.

They are fearful, unhappy, and hoarding cash in case the market collapses still further. That's according to the latest monthly Merrill Lynch survey of fund managers world-wide.

"Fund managers and asset allocators are the most risk averse in more than seven years," reports Merrill on Wednesday. "A net 41% of fund managers say that they are overweight cash -- a level last seen in the aftermath of the '9-11' terrorist attacks. … Investment time horizons have almost shrunk back to extremes last seen in March 2003, while the number of investors adopting risk-averse investment strategies has hit new highs."

Merrill calls this "an unprecedented combination of high cash levels and low risk appetite."

This is a pretty good contrarian indicator. If these guys are sitting on cash, that means they've already sold. From a contrarian standpoint that means a lot of the big money is already out of the market - and will have to get back in at some point. This isn't a timing indicator though; there is no way to know when they'll start buying or what will trigger it.