CHART OF THE DAY: An Obscure Contrarian Indicator Says Stock Market Investors Are Extremely Bullish

Last week, ahead of a deal in Congress to temporarily raise the nation's debt limit, investors pulled $70 billion from money market funds while pouring $10.6 billion into U.S. equity funds.

In a note to clients - titled "Rolling Default Diversions, 3Q Surprises & US Equity Parabolic Blow Off" - Jefferies chief global equity strategist Sean Darby highlights an obscure contrarian indicator that points to "extremely bullish" investor sentiment.

"A contrarian market indicator is the amount of assets held in the Rydex Money Market funds," says Darby. "Investors who deposit money with Rydex use the Government money market fund when uninvested in other asset classes. Hence, historically low levels of money in the fund are associated with investors being fully invested elsewhere and extremes in bullish sentiment. The latest data shows that investors are extremely bullish."

Bloomberg, Jefferies