In our August issue of InvesTech Research, we identified margin debt as a warning flag given its steep downturn from a record-high reading. However, the latest margin debt reading showed that speculation regained momentum last month as it surged to yet another record high. Historically, peaks in margin debt have preceded or coincided with market tops. As a result, the new high in margin debt today lessens the worrisome signal previously given by this tool, yet its extreme level is an indication that there is still an excessive amount of speculation in the equity market.
