The famous saying that history doesn’t repeat itself, but it sure does rhyme may be at play here. Time will tell.
One long-standing indicator of stock market health is the amount of money borrowed by investors and speculators for stock purchases – called “margin debt”. The amount of outstanding margin debt reached a peak last April and has declined steadily ever since. Originally devised in the 1970’s by market analyst Norman Fosback, the margin debt indicator has a good record of identifying Bull and Bear markets when compared to its own 12-month moving average. The identification is even more accurate when the margin debt breach is more than a one-month aberration. Unhappily for the Bulls, margin debt has now remained below its 12-month moving average for 5 consecutive months.