Major Support Levels Are Being Broken

By on June 17, 2011

The stock market’s swoon since early May is now causing it to approach and break some serious support levels. Witness the Vanguard Total World ETF (VT) which is sitting at the 200 day moving average support level. A serious breach below $47.00 could result in panic selling and margin calls.

Click on image to enlarge:

Margin debt is currently near a record in nominal dollars. Doug Short shows margin debt is also elevated in inflation adjusted terms, but not at a record.  Leveraged investors may be forced to sell in a panic scenario.

2 Comments

  1. Norma Stits

    June 20, 2011 at 8:24 pm

    Are leveraged ETFs considered on margin for calculation purposes?

    • Jenny Tulworts

      June 28, 2011 at 4:26 pm

      Not in this study.

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