The same surge in debt that happened at the last two major tops is happening again. We are in an area that has been hard for SPX to continue to rise. Will it be different this time? Peaks in the margin debt at these levels have coincided with tops in SPX. It looks like May is going to be another up month so it is possible the debt number will climb some more.
Here is a look at the credit balance data.
There was another sizable drop in the credit balance in April. We are well below the level at the 2007 top and rapidly closing in on the 2000 top.
The use of margin is probably one of the best sentiment indicators available. When people are sure of the up trend they load up. Maybe it does not feel like the optimistic sentiment at the 2000 and 2007 tops, but it looks like it from the margin data. Both of those tops saw retests of the highs with lower margin debt levels. Will that happen again and give us a better clue we are at the final high? The global economy was humming along at the other tops. That is not the case this time. We are in or close to being in a global recession at the moment. If the market has a significant sell off I am not sure we can count on a similar retest.
Bob
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