Margin debt as a percent of GDP fell to an 18-month low in April as investor exuberance and speculation continues to unwind. Similar to the major stock market top in 2007, margin debt peaked over three months ahead of the S&P 500. Margin debt’s recent collapse –and latest reading– have confirmed the January stock market peak is likely a longer-term market top. As long as this indicator continues to fall in the absence of bullish technical signals, investors should proceed with caution in this high-risk market environment.
