There are many indicators that are supposed to predict where the market might be heading. Let’s look at one that might help foresee the next market move —
I was looking through my research sources this week and this indicator threw up a red flag for me. The Margin Debt Yearly Change. This indicator shows how much margin debt is being used in the U. S. Why is this important. Just like all credit usage, the more you have, and if you do not have the ability to print more, the smaller the event needs to be to trigger selling of assets to cover the dreaded margin call.
This chart shows that over the last 20 years we have had six corrections in the stock market. This cycle we are in is the largest by far, peaking at around $350 Billion.
Before the past recessions that have happened, we saw the number come way down in a sharp fashion. Very similar to what we have now.
After hitting all-time highs in the Market, it makes sense to put on some hedges. Check out the Options Edge To get help with hedging your portfolio.
Debit balances in margin accounts at broker/dealers.
Note: Shaded red areas are S&P 500 bear market declines of 20% or more. Yellow areas show bull markets.
Source: New York Stock Exchange through December 1996, FINRA thereafter, and Haver Analytics.
Chart from Yardeni.com
Happy Monday. Good Luck out there this week.
Global Spotlight
Iraq’s prime minister visits Washington. During his trip, Iraqi Prime Minister Mustafa al-Kadhimi will meet with U.S. President Joe Biden on July 26. While their meeting will focus on a range of economic and strategic issues, the main focus will be the issuance of a joint statement on a mutually amenable timeline for concluding the U.S. combat mission in Iraq.
A Turkish-Russian joint economic commission. Turkish and Russian economic officials will meet July 30 in Moscow for a session of the two countries’ Joint Economic Commission. The meeting will reportedly focus on the logistics of reaching a target of $100 billion in trade.
Senior U.S. officials from the Defense and State departments visit the Asia-Pacific region. U.S. Deputy Secretary of State Wendy Sherman will conclude her regional tour that began July 18 with a previously unscheduled July 25-26 visit to China to meet with Chinese Foreign Minister Wang Yi.
Malaysia’s parliament convenes, possibly triggering a political crisis. Malaysian Prime Minister Muhyiddin Yassin will convene the lower house of his country’s parliament for a five-day session beginning July 26 to be followed by a three-day upper house session starting Aug. 3.
Stratfor.com
Economic Calendar
Briefing.com has a good U.S. economic calendar for the week. Here are the main U.S. releases.
Briefing.com
Last Weeks Numbers
Review Last weeks numbers here.
Earnings
Source I/B/E/S data from Refinitiv
Aggregate Estimates and Revisions
- 21Q2 earnings are expected to increase 78.1% from 20Q2. Excluding the energy sector, the earnings growth estimate is 64.3%.
- Of the 120 companies in the S&P 500 that have reported earnings to date for 21Q2, 88.3% have reported earnings above analyst expectations. This compares to a long-term average of 66% and prior four quarter average of 83%.
- 21Q2 revenue is expected to increase 19.8% from 20Q2. Excluding the energy sector, the growth estimate is 16.5%.
- During the week of July 26, 177 S&P 500 companies are expected to report quarterly earnings.
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