Margin & The S&P Correlation

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

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