Peak in US equities is months away

A peak in net margin debt precedes a peak in US equity prices by three to six months, according to Riccardo Ronco, Head of Technical Analysis at Aviate Global in London. This happened in 2000 and 2007, and Ronco believes we should be wary of it happening now.

Looking at the chart (for the S&P 500, NYSE margin debt and NYSE net margin debt), Ronco points out that absolute margin debt has been falling recently and is close to crossing below its 12-month moving average. Once it does cross below, this may provide confirmation that net margin debt has peaked and equity prices could top out only a few months later.

See chart.