Margin debt surged to new highs in October in a clear indication that speculation remains alive and well in the stock market. Historically, peaks in margin debt have preceded or coincided with market tops. While the new high in margin debt today lessens this concern, its extreme level is an indication that there is still an excessive amount of speculation in the market today.
This message is also being corroborated by both our InvesTech Investor Psychology Barometer –which is in the Extreme Optimism zone– and our InvesTech Canary Index – which is holding technical support. Going forward, we’ll be watching all three of these indicators closely for signs that the speculative psychology on Wall Street is coming undone.
