I keep seeing NYSE margin debt showing at record high as somehow a bearish indicator. This may not be supported by the historical data.
Merrill’s Stephen Suttmeier points out that, to the contrary, Margin Debt and S&P500, have often moved together. Indeed, when we look at the rate of change, this has in the past corresponded to a secular breakout in markets.
Here is Suttmeier:
“NYSE margin debt stood at a new record high of $401.2b and exceeded the prior high from April of $384.4b. This confirms the new S&P 500 highs and negates the bearish 2013 set-up that was similar to the bearish patterns seen at the prior highs from 2000 and 2007, where a peak in margin debt preceded important S&P 500 peaks (see Chart 1 on page 2). In addition, a breakout for NYSE margin debt preceded/confirmed the breakout for the S&P 500 in 1980 (Exhibit 2).
In other words, a secular breakout for the US equity market in the early 1980s coincided with a big breakout in the absolute level of NYSE margin debt.
That last sentence is key: If the rate of change data somehow corresponds to past shifts in secular markets from bears to bulls, this is potentially a very significant factor.
NYSE margin debt, Net Tabs, & weekly relative ranks
Stephen Suttmeier, CFA, CMT
Chart Talk, Market Analysis
BofA Merrill Lynch
Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.
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