One of the biggest buyers of U.S. stocks has turned so bearish that a growing number of investors say it can only mean one thing: buy.

Hedge funds that aim to profit from global economic trends -- a group that oversees some $550 billion -- spent the past month putting on trades that would profit from a decline in equities. As a result, such “short” positions exceed bullish ones by 22 percentage points, their most pessimistic stance since January 2009, Credit Suisse Group AG says.

Traders are salivating over the thought of all that money from so-called macro funds flowing back into equities, especially if the market proves resilient to higher interest rates imposed by the Federal Reserve. The Standard & Poor’s 500 Index has gone almost four years without a decline of 10 percent or more, the third-longest stretch ever.

“There is perhaps no better positive short-term indicator for stocks than a surge in bearishness,” said Howard Ward, chief investment officer of growth equities at Mario Gabelli’s Gamco Investors Inc., which oversees $45.4 billion in Rye, New York. “Virtually every effort to time this market for the past six years has failed. This one likely will fail too.”

David Fuller's view

I think sentiment among investors last week was the most bearish that I recall since 2011.  Is that a contrary indicator or will they become even more bearish between now and the end of October?

The charts will show us over the next couple of months but as I will be away until the 14^th of September, keep an eye on influential ones, including these Wall Street indices shown on a daily basis: Dow Jones Industrials, S&P 500, Nasdaq Composite, Russell 2000 and Transports.  

These have all lost some form over the last few months, so evidence of recovery at this stage would require: 1) the recent lows to hold; 2) sufficient evidence of new short-term uptrends to trigger short covering and renewed demand.