Margin & The S&P Correlation

David Frost // Additional Articles


January 5  

Margin debt, also known as “borrowing to buy stocks and other securities” has increased and gotten ahead of the S&P 500.

It normally follows the index in both directions, up and down.  When stocks on margin debt get ahead of the market index, any significant drop can have a cascading effect because stocks and other securities tend to get sold to cover any pending margin calls.

There are stealth technicians and blogs calling for an expectation of a 5-7% drop beginning as early as tomorrow.

As we know, the issue is that when too many people expect something, it rarely happens.

Margin and S&P Chart

About the Author

Trading and investing in markets is second nature to some, but a mystery to others. The goal is to provide a forum where everyday people aspiring to be part time or full time traders will learn how view markets differently and profit beyond their wildest dreams.

David Frost