TrimTabs Investment Research is reporting that both its demand and supply-side indicators suggest the rebound in stock prices will not be short lived, and as a result it remains "cautiously bullish" at 50% long on U.S. equities. TrimTabs is an independent research service that publishes detailed daily coverage of U.S. stock market liquidity. It's report comes when Europe is also preparing for an equities rally: Despite subdued risk appetite, two thirds of investors view European equities as cheap, the highest reading since February 2003. This offers scope for a rally should economic news improve," said Gary Baker, head of European Equities strategy at BofA Merrill Lynch Research. The TrimTabs Demand Index, which uses 21 flow and sentiment variables for market timing, came in at 83.8 on Thursday Sept. 9, a decrease from its peak of 92.4 on Aug. 30. This number, however, is above the neutrality point of 50. TrimTabs also said that day traders are still betting on lower stock prices, which indicate a "bullish" advance. Leveraged short U.S. equity exchange-traded funds (ETFs) issued 3.8% of assets in the past week, while leveraged long ETFs redeemed 6.8% of assets. Equity funds lost an estimated $20.9 billion since the start of August, while equity ETFs redeemed $6.5 billion, a sign investors are leery of U.S. equities. From a  supply perspective, corporate liquidity flows were modest the past week, but TrimTabs said the longer-term trend is positive. Corporate buying over the past months outweighed corporate sellings five to one, including some large transactions such as the Genzyme merger ($16.3 billion), the McAfee buyout ($7.2 billion) and the Burger King buyout ($2.5 billion). TrimTabs is erring on the side of caution because of the weak state of the economy. The firm reported that insider liquidity buying slowed dramatically in the first nine trading days of September, while income tax withholdings only increased 1.7% year-over-year for the past four months. It also does not expect job growths to be substantial in the private sector. According to the BofA Merrill Lynch September survey of fund managers, global investors are approaching the fourth quarter with a heightened sense of caution. "One key signal of low risk appetite is large numbers of investors simultaneously saying that equities are undervalued and bonds are overvalued," the report concludes. "The spread in perceived valuations of bonds and equities has ballooned to more than 100 points for the first time since the survey started measuring it in early 2003. A net 38 percent of the panel believe equities are undervalued while a net 68 percent believe bonds are overvalued." Write to Christine Ricciardi.