Margin debt reaching all-time highs can be viewed as a sign of excessive confidence in the markets, yet knowing this hasn’t been really that helpful when it comes to portfolio construction. 

What has happened in the past that has been helpful when it comes to margin debt is this…when Margin Debt was hitting all-time highs and turned lower (which in did back in 2000 & 2007), the S&P 500 was near a peak in prices.

Doug Short updates us in the chart above, reflecting that Margin debt now for the second month in a row has decreased from the highest levels in all of history at (1). Does this mean that “the top” is in for the S&P 500? Not in my opinion. Does it send a word of caution towards very large portfolio exposure to the stock market? The Patterns would suggest it does.

How The Recent Decline In Stocks Looks "Eerily" Like Major Bear Markets Of The Past