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(12/28/13)
The latest NYSE Margin Debt Level for November (adjusted for
inflation) is nearly back to its at all time high made in 2007 as investors
continue to borrow money to buy stocks . Also
the amount of Margin Debt has spiked well above its 6 Month Moving Average
(red line) just like in 2007 and 2000 (point A) which preceded significant
corrections.
Meanwhile investors have become extremely complacent as the 5
Day Average of the Put to Call Ratio is back at a 7 year low. The last
time it dropped below the 0.70 level was in April of 2010 (point B) which was
followed by a 16% correction in the S&P 500.
If the S&P 500 were to undergo a
similar correction in 2014 that would be roughly a 300 point drop with major
support in the mid to upper 1500's. Notice this is where the longer term
upward trend line (purple), 23.6% Retrace from 667 to the most recent high and
the two prior all time highs (2007 and 2000) all converge at. 
Since
the 2011 low it has been an easy ride for investors as every minor dip has been
bought. However with margin debt near all time highs and complacency
at an extreme level be very careful as we move into 2014.
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