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by Ashraf Laidi
Posted: Oct 7, 2008 13:55
Comments: 12
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Margin Debt Shows More Selling Ahead

There is one concrete reason why US indices could lose at least another 20-25% from current levels. The powerful correlation between margin debt usage by member firms of the NY Stock Exchange and the trend of major indices such as the S&P500 and the Dow Jones Industrials Average suggests further selling ahead in the main indices.
 
 
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Nick E.
United States
Posted Anonymously
16 years ago
Oct 7, 2008 20:44
Those margin debt charts are gorgeous... They really tell an interesting story. My charting eye tells me we have at least 60 billion plus left until real support (Conversely seen as the complete deleveraging of the previous cycle [aka the last level we broke out from and the new level of support]).

How long do you think this leverage will take to get out of the market. And will the dollar continue to surge as the US delevers and repatriates their money from around the world thus buying dollars as the "losses" are brought home???
harmonycptl
California, United States
Posted Anonymously
16 years ago
Oct 7, 2008 19:38
Ashraf,

Been out on vacation - missed all the latest action.

I lisened intently to latest Bernanke speach and although there is no mention of immediate cuts to the discount rate, but he did say that potential downside risks appear worse and the Fed is ready to resond if these risks actually materialize, which seems to signal a rate cut in the near future.

Do you think that the marketplace has already priced in this potential cut, and continued deleveraging will override any actual rate cut(s)?
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