NYSE Margin Debt Falls Again: Confirmation of a Major Market Turning Point?

NYSE Margin Debt Falls Again: Confirmation of a Major Market Turning Point?

The following article from AdvisorPerspectives.com strongly indicates that the US stock market has already entered a low term bear market. It shows the relationship of stock margin debt and stock prices. Stock margin peaked last year.

 

 

 

The New York Stock Exchange publishes end-of-month data for margin debt on the NYX data website, where we can also find historical data back to 1959. Let’s examine the numbers and study the relationship between margin debt and the market, using the S&P 500 as the surrogate for the latter.

The first chart shows the two series in real terms — adjusted for inflation to today’s dollar using the Consumer Price Index as the deflator. At the 1995 start date, we were well into the Boomer Bull Market that began in 1982 and approaching the start of the Tech Bubble that shaped investor sentiment during the second half of the decade. The astonishing surge in leverage in late 1999 peaked in March 2000, the same month that the S&P 500 hit its all-time daily high, although the highest monthly close for that year was five months later in August. A similar surge began in 2006, peaking in July 2007, three months before the market peak.

Debt hit a trough in February 2009, a month before the March market bottom. It then began another major cycle of increase.

The Latest Margin Data

The NYSE margin debt data is a few weeks old when it is published. The latest debt level is down 2.7% month-over-month and 14.3% off its real (inflation-adjusted) record high set in April 2015. Here is an overlay of margin debt and the S&P 500 adjusted for inflation. In nominal terms, the S&P 500 peaked on May 21st of last year. The monthly close peak, adjusted for inflation was three months earlier in February.

Margin Debt

 

Read more and see more charts: http://www.advisorperspectives.com/dshort/updates/NYSE-Margin-Debt-and-the-SPX

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