Today, I have some good news for you. The re-leveraging has begun.
We provide the chart below each day for the subscribers of our website (which you can learn more about by clicking here). In the past we have shown the negative trend of margin debt, but today's message is that the re-leveraging has begun. As of today, we now have a 2% year-over-year increase in margin debt. The chart below provides some clues as to the historical message of what this new trend means for the future.
You can see that the margin debt trend hit its low point in June and now has its head above water. In all these past experiences dating back to the early '90s, when you see this indicator move below the line (of 0%), and then reverse, it has meant several years of an ensuing bull market. We believe that is in the cards this time as well.
However, don't confuse this long-term message with our slight short-term caution that we've been suggesting at this juncture. The S&P 500 has moved up over 10% since June 4th, and it's made a new recovery high. We don't like anything but up markets, but sometimes our indicators suggest that it is in our best interest if we have a little "pause to refresh."
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