(Bloomberg) -- If you really love the U.S. market right now, you should let it go. That's according to the BNP Paribas Love-Panic U.S. Index, a contrarian indicator tracking a broad series of data to gauge when investors have become blinded by their emotions.
The measure seeks to identify distress and euphoria to predict future market returns. A negative reading suggests panic, indicating a buy, while a positive figure is a sell signal.
At 21.3, the highest on a monthly basis since March 2014, the index is well into sell territory, according to an Oct. 16 note by a team of BNP strategists led by global head Edmund Shing.
“The model signals an average downside of 12.5 percent over the next six months versus history,” the report said.
Key indicators include the VIX, fund flows, small-cap stock performance versus large caps and the economic surprise indicator.
--With assistance from Tracy Alloway
To contact the reporter on this story: Eric Lam in Hong Kong at elam87@bloomberg.net.
To contact the editors responsible for this story: Christopher Anstey at canstey@bloomberg.net, Colin Simpson, Andreea Papuc
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