Barron’s takes a look at what could be a bad omen for the future of the stock market (subscription required), at least in the short-term: “Even after a recent drop, margin debt remains within spitting distance of the all-time high it hit in July, and 43% higher than it was a year ago. At a current level of 2.4% of the market’s adjusted market cap, margin debt is 3.4 times its 62-year average.

Why nag? For starters, high margin debt could aftermath in widespread margin calls in the wake of rapid market decline, main to a domino effect prolonging the market decline. For evidence of that phenomenon, please

But high margin levels are additionally a very bearish contrarian indicator. They show that many investors are maxed out — even whether they wanted to, they simply couldn’t buy more stock — they’re already borrowing at near-record levels to do just that! New money is often a prerequisite for a bull market, and already-high margin levels could manufacture it tough for new money to come in. The bullishness of the investment community is a very bearish indicator for contrarian analysts.

Original post by Zac Bissonnette

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