Margin Debt Has Decreased Substantially

By on January 19, 2009

Brett Steenbarger at Traderfeed reports that going back to the start of his data series on margin debt (1944), the 20-week average change is the weakest that it has ever been. Specifically, margin debt has been down by over 42% in the last 20 weeks. The nearest we’ve come to such unwinding of margin has been a 31% drop in 1946 and 29% drops in 2001 and 1988.

However, Mr. Steenbarger is not confident this marks a bottom in stock market sentiment because until there is some moderation in the decline in margin debt numbers, as occurred late in 2002 and early in 2003, it is probably premature to assume that bear market bounces are fresh bull markets.


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