Even as U.S. blue chip stocks hit a record high on Tuesday, a Bank of America Merrill Lynch analyst cautioned that a sell-signal may be forming that might spoil the party.
Mary Ann Bartels, a technical research analyst at the bank, said in her weekly Hedge Fund Monitor note that lower cash levels in margin accounts could suggest that a sell-off may lie ahead.
The research note was released on the same day the Dow Jones industrial average steamed past 14,164.53, the record close it set in 2007.
"Current levels have fallen to levels that have generated a tactical sell signal based on a 2-standard deviation Z-score reading." Bartels wrote, referring to cash balances in margin accounts.
What happens next could be similar to what happened nearly three years ago, she added.
"The last time a sell signal was generated was on April 2010 and the S&P 500 subsequently corrected by 16 percent in the two months."
She also noted that stock market investors have become significantly more confident in their bets as they have used more borrowed money to finance trades. Leverage rose 31.6 percent year on year and 10.2 percent month over month to $364 billion in January compared with a peak of $381 billion seen in July 2007, the research note said.