We recently wrote about the increasing level of NYSE Margin Debt outstanding. This has continued to ramp sharply over the last several weeks and has now reached levels that have been, over the last decade, where market tops have usually been sighted.
The chart shows the S&P 500 as compared to the 6-month rolling rate of change in the amount of margin debt that is outstanding on the NYSE. Once the rate of change begins to exceed 23% on a rate of change basis this has been normally associated with speculative increases in market participation which are commonly found around market peaks.
While just broaching this level is not indicative of immediate corrective market action it is a warning sign that should be paid attention to. Remember, in investing, the goal is to monitor the gathering storm clounds and then find the saftey of shelter BEFORE the actual storm hits.