CITI: We See A 'Clear Warning Sign Of Substantial Complacency'

Citi's Panic/Euphoria model has a pretty extraordinary track record for predicting returns.

It's a contrarian indicator, which means a "euphoria" signal is bearish and a "panic" signal is bullish. According to Citi, the model's components include "NYSE short interest ratio, margin debt, Nasdaq daily volume as % of NYSE volume, a composite average of Investors Intelligence and the American Association of Individual Investors bullishness data, retail money funds, the put/call ratio, CRB futures index, gasoline prices and the ratio of price premiums in puts versus calls."

And currently, the model dangerously close to euphoria territory, reaching its highest level since 2008.

"The Panic/Euphoria Model is sending a clear warning sign of substantial complacency," said Citi's Tobias Levkovich in a note to clients today. "The investment community's mindset is widely monitored and investors anecdotally have become more bullish in conversations and meetings looking to an expected traditional late-year seasonal rally, despite a better than 20% move year-to-date."