{"id":10141,"date":"2014-06-14T12:26:28","date_gmt":"2014-06-14T16:26:28","guid":{"rendered":"http:\/\/www.pgm-blog.com\/?p=10141"},"modified":"2014-06-14T12:26:28","modified_gmt":"2014-06-14T16:26:28","slug":"what-are-the-nyse-margin-debt-vix-telling-you","status":"publish","type":"post","link":"https:\/\/www.pgmcapital.com\/nl\/what-are-the-nyse-margin-debt-vix-telling-you\/","title":{"rendered":"What are the NYSE Margin Debt &#038;  VIX telling you"},"content":{"rendered":"<p><a href=\"http:\/\/www.pgm-blog.com\/wp-content\/uploads\/2014\/06\/greed.jpg\"><img loading=\"lazy\" decoding=\"async\" class=\"alignnone wp-image-10147\" src=\"http:\/\/www.pgm-blog.com\/wp-content\/uploads\/2014\/06\/greed.jpg\" alt=\"greed\" width=\"300\" height=\"180\" \/><\/a><a href=\"http:\/\/www.pgm-blog.com\/wp-content\/uploads\/2014\/06\/the-fear-2-230x150.jpg\"><img loading=\"lazy\" decoding=\"async\" class=\"alignright wp-image-10148 size-full\" src=\"http:\/\/www.pgm-blog.com\/wp-content\/uploads\/2014\/06\/the-fear-2-230x150.jpg\" alt=\"Fear\" width=\"230\" height=\"150\" \/><\/a><\/p>\n<p><span style=\"color: #2c2c29;\">Dear\u00a0<\/span><strong style=\"color: #2c2c29;\">PGM Capital<\/strong><span style=\"color: #2c2c29;\">\u00a0blog readers.<\/span><\/p>\n<p><span style=\"color: #2c2c29;\">In this weekend&#8217;s blog edition, we want to discuss with you whether or not the following data are signalling a coming crash of the USA stock-markets:<\/span><\/p>\n<ul>\n<li>Margin Debt at all Time High<\/li>\n<li>VIX at a 7-year low<\/li>\n<li>The CNN Fear &amp; Greed index, currently at Extreme Greed<\/li>\n<\/ul>\n<p><span style=\"color: #0000ff;\"><strong>NYSE MARGIN DEBT AT ALL TIME HIGH:<br \/>\n<\/strong><\/span>USA stocks have advanced significantly over the last nine months associated with increases in Margin \u00a0Debt. However borrowing to buy equities or USA stocks could have reached a turning point, raising concerns that equity prices may have plateaued or could even decline.<\/p>\n<p>The margin debt at the New York Stock Exchange rose to an all-time high of about US$ 465.72 billion in February of this year. The highest margin debt, prior to this one, was US$ 381 billion which was recorded in July of 2007, right before the financial crises.<\/p>\n<p>The increase in NYSE margin debt came as the SPDR S&amp;P 500 ETF&#8217;s (<span style=\"color: #0000ff;\"><strong><a style=\"color: #579fc4;\" title=\"SPDR S&amp;P 500 (SPY)\" href=\"http:\/\/finance.yahoo.com\/q?s=SPY&amp;ql=0\" target=\"_blank\"><span style=\"color: #0000ff;\">SPY<\/span><\/a><\/strong><\/span>) adjusted monthly closing value also hit an all-time high of US$185.47 during the same period.<\/p>\n<p>NYSE margin debt is the aggregated dollar value of issues bought on margin (i.e. borrowed money) across the exchange. Many equity-market participants consider it a gauge of speculation in the stock market. The U.S.\u00a0Federal Reserve\u00a0currently has the initial margin requirement set at 50 percent.<\/p>\n<p>As can be seen from below chart, there is a strong positive correlation between NYSE margin debt and SPY.<\/p>\n<p><a href=\"http:\/\/www.pgm-blog.com\/wp-content\/uploads\/2014\/06\/1026510_13960288835606_rId11.png\"><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-10145\" src=\"http:\/\/www.pgm-blog.com\/wp-content\/uploads\/2014\/06\/1026510_13960288835606_rId11.png\" alt=\"\" width=\"500\" height=\"343\" \/><\/a><\/p>\n<p><span style=\"color: #0000ff;\"><strong>THE VIX AT LOWEST LEVEL SINCE 2007:<br \/>\n<\/strong><\/span>The CBOE volatility index, or\u00a0VIX\u00a0(<span class=\"inlink_chart\" style=\"color: #0000ff;\"><a class=\"inlink\" style=\"font-weight: bold; color: #437193;\" title=\"VOLATILITY S&amp;P 500 (^VIX)\" href=\"http:\/\/finance.yahoo.com\/q?s=^VIX\" target=\"_blank\"><span style=\"color: #0000ff;\">VIX<\/span><\/a><\/span>), measures investors&#8217; expectations for market volatility in the near term.<\/p>\n<p>The VIX is often called the fear index. When it is high investor sentiment is toward increased volatility and corresponding higher risk.<\/p>\n<p>A lower number indicates investors are less concerned (fearful) about the market and anticipate low volatility.<\/p>\n<p>As can be seen from below chart, o<span style=\"color: #151515;\">n Friday June 8th, it dipped below 11 for the first time since February 2007.\u00a0<\/span><\/p>\n<p><a href=\"http:\/\/www.pgm-blog.com\/wp-content\/uploads\/2014\/06\/140605164914-vix-620xa.png\"><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-10151\" src=\"http:\/\/www.pgm-blog.com\/wp-content\/uploads\/2014\/06\/140605164914-vix-620xa.png\" alt=\"\" width=\"500\" height=\"281\" \/><\/a><\/p>\n<p><span style=\"color: #151515;\"><span style=\"color: #000000;\">We all remember 2007. The S&amp;P 500 was hovering around the 1,400 level in February and then rallied up to 1,576 in October, for its value to be cut in half in\u00a0<\/span><span style=\"color: #000000;\">the next 17 months.<\/span><br style=\"color: #000000;\" \/><br style=\"color: #000000;\" \/><span style=\"color: #000000;\">The VIX jumped to 37.50 in August 2007 to peak at 89.53 in October 2008.<\/span><\/span><\/p>\n<p><span style=\"color: #0000ff;\"><strong>THE FEAR &amp; GREED INDEX:<br \/>\n<\/strong><\/span><span style=\"color: #111111;\">This is an index developed and used by\u00a0<\/span><a title=\"Fear &amp; Greed Index\" href=\"http:\/\/money.cnn.com\/data\/fear-and-greed\/\" target=\"_blank\"><span style=\"color: #0000ff;\"><strong>CNNMoney<\/strong><\/span><\/a><span style=\"color: #111111;\">\u00a0to measure the primary emotions that drive investors: fear and greed. The Fear and Greed Index is based on seven indicators:<\/span><\/p>\n<ol>\n<li>Stock Price Momentum &#8211; as measured by the S&amp;P 500 versus its 125-day moving average<\/li>\n<li>Stock Price Strength &#8211; based on the number of stocks hitting 52-week highs versus those hitting 52-week lows on the NYSE<\/li>\n<li>Stock Price Breadth &#8211; as measured by trading volumes in rising stocks against declining stocks.<\/li>\n<li>Put and Call Options &#8211; based on the Put\/Call ratio<\/li>\n<li>Junk Bond Demand &#8211; as measured by the spread between yields on investment grade bonds and junk bonds<\/li>\n<li>Market Volatility &#8211; as measured by the CBOE Volatility Index or VIX<\/li>\n<li>Safe Haven Demand &#8211; based on the difference in returns for stocks versus Treasuries<\/li>\n<\/ol>\n<p>As can be seen from below chart, on Friday, June 13, this indicator shows extreme greed in the markets:<\/p>\n<p><a href=\"http:\/\/www.pgm-blog.com\/wp-content\/uploads\/2014\/06\/Screen-Shot-2014-06-13-at-11.31.12-AM.png\"><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-10152\" src=\"http:\/\/www.pgm-blog.com\/wp-content\/uploads\/2014\/06\/Screen-Shot-2014-06-13-at-11.31.12-AM.png\" alt=\"Fear &amp; Greed Index\" width=\"502\" height=\"204\" \/><\/a><\/p>\n<p><strong style=\"color: #0000ff;\">PGM CAPITAL COMMENTS:<br \/>\n<\/strong>There is a rare complacency in the markets. At this very moment, volatility is near all-time lows, optimism is at record highs, and mainstream forecasters are once-again calling for ever-climbing prices &#8212; just like they were in 1999 and 2007.<\/p>\n<p>Margin Debt indicates that investors are leveraging their stock market bets, which is what happened in 2007. Leverage can be used as a sentiment indicator because it is correlated to investor confidence. A decline in Margin Debt may therefore signal bearish sentiment in the equity market, regardless of the\u00a0fact that equities are at a record high.<\/p>\n<p>Looking at the NYSE&#8217;s Margin Debt chart with the S&amp;P500 index, Margin Debt posted its second monthly decline in more than nine months. The figures are a few weeks old, but last time the NYSE&#8217;s Margin Debt ended a bull period there was a significant correction in the equity markets.<\/p>\n<ul>\n<li>Back in 1987, when the Margin Debt hit a record high, S&amp;P500 corrected by a 30% decline.<\/li>\n<li>In 1998, S&amp;P500 slipped by 15.5%.<\/li>\n<li>Between 2000 and 2002 S&amp;P500 lost more than 46%.<\/li>\n<li>In the bear market and great recession of 2007 and 2009 the S&amp;P500 crashed more than 52%.<\/li>\n<li><a href=\"http:\/\/www.pgm-blog.com\/wp-content\/uploads\/2014\/06\/ronco-margin-2.png\"><img loading=\"lazy\" decoding=\"async\" class=\"alignnone wp-image-10153\" src=\"http:\/\/www.pgm-blog.com\/wp-content\/uploads\/2014\/06\/ronco-margin-2.png\" alt=\"ronco-margin-2\" width=\"500\" height=\"322\" \/><\/a><\/li>\n<\/ul>\n<p>Due to this most investors are asking themselves;<\/p>\n<p>Is the VIX at its lowest level since 2007, combined with the NYSE margin debt at all times signalling a coming Crash of the US Markets?<\/p>\n<p>Last but not least maybe this quote of Warren Buffett is applicable:<\/p>\n<p class=\"quoteText\" style=\"color: #181818; text-align: center;\"><span style=\"color: #0000ff;\"><strong>\u201cBe Fearful When Others Are Greedy and Greedy When Others Are Fearful\u201d<\/strong><\/span><\/p>\n<p>Until next week,<\/p>\n<p style=\"color: #2c2c29;\"><a style=\"color: #807d7a;\" href=\"http:\/\/www.pgm-blog.com\/wp-content\/uploads\/2014\/05\/Suriname-Times-foto.jpg\"><img loading=\"lazy\" decoding=\"async\" class=\"alignnone wp-image-9925 \" src=\"http:\/\/www.pgm-blog.com\/wp-content\/uploads\/2014\/05\/Suriname-Times-foto-150x150.jpg\" alt=\"Suriname Times foto\" width=\"87\" height=\"87\" \/><\/a><\/p>\n<p style=\"color: #2c2c29;\">Eric Panneflek<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Dear\u00a0PGM Capital\u00a0blog readers. In this weekend&#8217;s blog edition, we want to discuss with you whether or not the following data are signalling a coming crash of the USA stock-markets: Margin Debt at all Time High VIX at a 7-year low The CNN Fear &amp; Greed index, currently at Extreme Greed NYSE MARGIN DEBT AT ALL<a href=\"https:\/\/www.pgmcapital.com\/nl\/what-are-the-nyse-margin-debt-vix-telling-you\/\">[&#8230;]<\/a><\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[8,10,19,20,13,15,1,18],"tags":[],"class_list":["post-10141","post","type-post","status-publish","format-standard","hentry","category-debt-crisis","category-eric-panneflek","category-financial-news","category-general-information","category-market-volatility","category-pgm-capital","category-uncategorized","category-world-economic-outlook"],"_links":{"self":[{"href":"https:\/\/www.pgmcapital.com\/nl\/wp-json\/wp\/v2\/posts\/10141","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.pgmcapital.com\/nl\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.pgmcapital.com\/nl\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.pgmcapital.com\/nl\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.pgmcapital.com\/nl\/wp-json\/wp\/v2\/comments?post=10141"}],"version-history":[{"count":0,"href":"https:\/\/www.pgmcapital.com\/nl\/wp-json\/wp\/v2\/posts\/10141\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.pgmcapital.com\/nl\/wp-json\/wp\/v2\/media?parent=10141"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.pgmcapital.com\/nl\/wp-json\/wp\/v2\/categories?post=10141"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.pgmcapital.com\/nl\/wp-json\/wp\/v2\/tags?post=10141"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}