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Skip NavigationMarketsBusinessInvestingTechPolitics & PolicyVideoWatchlistInvesting ClubPROLivestreamMenuStock market sentiment on Wall Street is downbeat. Perhaps too downbeat. Wells Fargo’s buy/sell sentiment gauge crossed the -1 level last week. Macro Risk Advisors noted that its market sentiment score has plunged to around 27 from roughly 61. Goldman Sachs pointed out Friday that hedge funds sold tech stocks at a record pace last week. Tech has been hit by a volatility wave in recent weeks amid concerns that companies may be borrowing too much cash for their artificial intelligence build-outs. The S & P 500 last week dropped nearly 2%, its biggest one-week slide since June. Credit fears are also showing up overseas. AI name Elice plunged more than 30% overnight in its public market debut in South Korea. But the rubber band may be stretched too far, potentially priming stocks for a rebound. At current levels, Wells Fargo’s sentiment gauge triggers a buy signal. Going back to 1998, the S & P 500 has returned 2.4% one month after sentiment gets so bearish. Returns are even stronger in the following three-, six- and 12 months, the bank said. “Caution is warranted in a decelerating profits/negative liquidity environment, but sentiment may have gotten too bearish around AI financing, midterms and Iran,” Wells strategist Ohsung Kwon noted. “We continue to expect a choppy market into year-end. We expect Semis to be range-bound with lower highs.” And while volatility may continue, the swift drop in market sentiment points to the potential that investors who were going to pare exposure to equities have already done so — making the path of least resistance higher.Read More