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No matter how bullish they may be, every investor must come to terms with the fact that this bull market, the longest in postwar history, is well over nine and a half years old now.
For that reason alone, it's important that we continue to look objectively at potential signals out there that might indicate the market becoming overextended to the upside.
Now, if you've been with us a while, it won't surprise you at all to learn that I look at thousands of charts each week. So, when a graphic hits my screen that I think is particularly useful, I like to pass it on.
I've found some charts that give us a top-down, "30,000-foot" view of the margin debt in play on the U.S. stock markets.
Margin debt is just money that is borrowed to buy stocks; most retail accounts can borrow 100% of their account balance to buy additional stock – at fairly low interest rates, too.
So why are we peeking at other people's money?
Well, analysts use margin debt as one measure of market participants' risk appetite. That "zest" for risk – or aversion to it, as the case may be – is a pretty good indicator of how much buying or selling you can reasonably expect in the short term.
Because it's important, margin levels are a never-ending grist for the article mill. In fact, you may have read some articles worrying about the fact that margin debt is at all-time absolute highs.
They're right about one thing: Margin is at all-time absolute highs, so let's dive in and look at what the charts have to show us…
About the Author
Nationally recognized technical trader. Background in engineering, system designs, and risk reduction. 26 years in the markets.