Rising Margin Debt Should Limit The Upside For The Stock Market

Rising Margin Debt Should Limit The Upside For The Stock Market

(Photo by Spencer Platt)



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Margin debt for the S&P 500 rose by 5.2% in August as the average tries to set a new all-time intraday high. This is a warning as a stock market peak usually occurs following a spike in margin debt.

Here's the chart as prepared by FINRA:

Margin Debt and the S&P 500



FINRA Margin Debt

The chart dynamics for the five major averages tell different stories. The weekly chart for the Dow Jones Industrial Average (.DJI) shows a potential downtrend with a declining 12-week slow stochastic reading. The weekly chart for the S&P 500 (.SPX) shows that this index is retesting its semiannual and annual pivots at 3,442.1 and 3,466.5.



Weekly