Market Signals: Monthly Brokerage Margin Levels from 2007 thru 2009

At times, investors may refer to the levels of margin debt undertaken by both retail and institutional investors to understand the current sentiments of these market participants.  As investors feel more speculative they may increase their margin levels to increase their market exposure and potential market gains. This indicator, as many others, is not solely dependable and should always be considered with other information.  Furthermore, margin has to be utilized to execute short trades.  Yet, low margin levels can indicate potential for more buying power to fuel a rebound, while margin at high levels can be a bearish indicator.  Moreover, investors should be aware that the accuracy and reliability of the data is not the best.  The firms that release the margin information do not have a standard method between themselves of collecting such data.  In general, the trend of these figures is probably more helpful than any individual month’s data.    The chart below tracks these margin levels.

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