Investors are selling their stocks even as the S&P 500 cruises to all-time highs, according to BofA

• Investors are selling stocks even as the S&P 500 surges to all-time highs, Bank of America said.
• The selling has been led by institutional clients and concentrated in individual stocks, not ETFs.
• The selling of stocks near record highs suggests euphoria has not taken over the market.
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Caution among investors continues to reign supreme as selling in stocks picks up even amid a surge to record highs for the S&P 500.

A Tuesday note from Bank of America said investors were net sellers of US stocks last week, with institutional investors driving the selling even as the S&P 500 crossed 4,000 for the first time.

According to Bank of America, investors have been selling individual stocks while buying ETFs. Last week, it tallied $400 million in net outflows from US stocks, the note said.

Data from the bank's client flow trends lines up with a recent note from Fundstrat's Tom Lee, who said institutions had substantially increased their cash balances over the past two weeks. Lee said he believes there's $4.5 trillion in cash that could serve as "firepower" to drive the market higher in April.

Bank of America said its flow data indicated that investors favored the industrials and materials sectors while dumping stocks in the communication-services sector.

The overall selling of stocks near record highs suggests euphoria has not taken over the market, which represents a bullish signal for contrarian investors.

That view is backed up by Bank of America's Bull & Bear Indicator, which remains solidly below the level that would generate a sell signal for the stock market. Additionally, the CNN Fear & Greed Index, designed to measure investors' emotion, recently moved out of "neutral" and into "greed" but remains below "extreme greed."

This sets up an ideal environment for investors, according to Ark Invest's Cathie Wood. In a Twitter exchange with Tesla CEO Elon Musk this week, Wood said, "This wall of worry is healthy: I would prefer to invest in the face of fear than exuberance!"

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