The Phaserl


Terrible Technicals

by John Rubino, Dollar Collapse:

I have a theory about technical indicators, which is that most people only pay attention to the ones that that confirm what they already think. Technicals are primarily entertainment, in other words. But every once in a while a market’s charts, graphs, and images line up in a persuasive way, and for U.S. stocks this looks like one of those times. A few examples:

Margin debt
This is a measure of how much money investors have borrowed against their stocks to buy new stocks. The more exciting their recent gains, the more willing they are to borrow. By definition, they’re most excited when stocks have been going up for a long time (otherwise stocks would have stopped going up), so high margin debt tends to precede big corrections. Today, margin debt is just shy of 2007’s all-time record.

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