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We mentioned earlier the recent rise in margin. Have a look at the following chart:

NYSE Member Firm Margin Levels
click to enlarge

nyse margin

Sources: Bloomberg, RR&A

The raw numbers are not what actually matter, and adjusting for inflation isn't significant.

The reason margin matters is that it is potentially revealing of extreme sentiment and/or speculation (margin clerks can do major damage in a downturn).

There are a few ratios I would like to identify and convert to oscillators relative to margin:

  • Total Margin / Total Market Cap
  • NYSE Margin / Account Assets
  • Margin / Trading Volume
  • Total Margin / Market Volatility
  • The idea would be to test these versus historical tops and bottoms . . .

    Source: What Does the Increase in Margin Trading on the NYSE Mean?