Wednesday 30 April 2014

Another pointless FOMC rally

2 comments :

  1. Bouraq...decided to do a little research on margin debt.Of course its given some notice ahead of the biggest crashes and bear markets.I mentioned yesterday it had dropped a small 2% in March.I looked back in 2011 where it had also had some contractions in margin debt.
    May and June 2011 were slight drops similar to last months.These are reported 2 months out.May 1st started an 8% drop in equity prices that lasted until July 27th.The drop in stocks and margin debt was simultaneous at this point.The May stock market correction could not have been forecast by margin debt because that months numbers dont get reported for 2 months.August of 2011 also had a drop in margin debt of 15% coinciding with stock losses during that same time.Margin debt contracting was CAUSED by the market declining...unlike the crashes in 2000 and 2008.This last report therefore may or may not mean much if the stock market takes off again.My thinking is if there is a shift in viewpoint by people that use margin debt from bullish to bearish(as in the past two bear markets)we ll have an indication.It s a tight timeline though as it takes two months to see previous margin debt.Worth watching and as I said a top in margin debt would subsequently be a top in stock prices.Cheers.

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  2. a little research on margin debt.It HAS contracted for a month or two on previous occasions with no long term change in the bull market.However in these instances margin debt went down SIMULTANEOUSLY with an equity correction...not as a leading indicator(as in 2000 and 2007.2011 saw 2 decreases in margin debt but only after the market started correcting.This years contraction (only 2%)may well be meaningless unless it continues to decline while stock prices increase.THAT would be a warning sign.

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