Margin Debt

Rising margin debt is interpreted as bullish for stocks because traders are using borrowed money in expectation of higher prices. Margin debt is leverage that traders take in brokerage accounts. Margin debt is described as a forward-looking measure with forecasting power over roughly six months and possibly one year. Rising margin debt indicates risk-on behavior and bullish expectations for the market. Shrinking margin debt is a major warning sign but not automatically a sell signal by itself. Shrinking margin debt has bearish implications because investors are selling and closing positions.