Stock Market Warning: Margin Debt Hits Record-High $401 Billion

investmentcontrarians.com / By Sasha Cekerevac
I had an interesting conversation the other day with a friend of minewho asked a very compelling question: with margin debt in the equities market hitting a new all-time high—$401 billion on the NYSE in September—is this a sign of a market top?
To find out what this really means, we have to dig a little deeper into how this can affect the equities market.
An increase in margin debt is really a story of investor sentiment. As the equities market moves up, this gives people more confidence and therefore increases investor sentiment. Many investors then borrowmoney to invest in the seemingly bullish market—this creates margin debt.
Now, this all sounds great on the way up, but in the end, the problem with higher levels of margin debt is twofold.
First, the very fact margin debt is increasing can be looked at from various angles. One is the obvious point of view that investor sentiment is becoming increasingly bullish on the equities market, so people are borrowing to get in on the action.
Another way to look at higher levels of margin debt is that while borrowing money to put into the equities market is bullish, as more money is chasing the same number of shares, at some point, if everyone is in the market, who’s left to buy?
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Coal: The World's Most Hated Resource Is a Buy

If I had to point to a segment of the natural resources sector with the lowest investor sentiment right now, it might well be coal.
Coal is thought of as antiquated and brutish, a relic that will soon be excised from the ranks of global energy markets.
It's easy to see why. On the surface, there's a lot to dislike about coal. The biggest strike against the industry is environmental. This month, the news has been rife with stories about record air pollution nearly shutting down a number of cities in northern China.
Whether it's for these environmental reasons -- or simply a matter of economics -- there's a sense that the world is turning away from coal.  (more)

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Day Trading Using Candlestick Charts

Day trading was made famous during the tech bubble of 2000.   From October of 1998 to March of 2000, the NASDAQ composite index went from 1492 to 5048, a whopping 240% return in 17 months.  I remember infomercials touting day trading as a career!!  Day trading back then was buy the open and sell the close. NEVER confuse genius with a bull market.  In this informative piece I will highlight intra-day high probability of success set-ups using popular candle patterns.   I'm assuming our readers have basic knowledge of candlestick construction.  I prefer analyzing intra-day candle set-ups because of the rapid dissemination of market information. I don't like to be the last one to show up at the party!  I will be highlighting the Engulfing formation. Let us review:

Bullish Engulfing Pattern:
 
The bearish candle real body of Day 1 is usually contained within the real body of the bullish candle of Day 2.  On Day 2, the market gaps down; however, the bears do not get very far before bulls take over and push prices higher, filling in the gap down from the morning's open and pushing prices past the previous days open.  The power of the Bullish Engulfing Pattern comes from the incredible change of sentiment from a bearish gap down in the morning, to a large bullish real body candle that closes at the highs of the day. Bears have overstayed their welcome and bulls have taken control of the market. (more)

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McAlvany Weekly Commentary

Bonus Culture is Breaking the Bank (FED)

Posted on 06 November 2013.

About this week’s show:
-Can the dollar hold above 79?
-Deficit spending no longer the cure
-Equity margin debt has broken all time highs

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American Campus Communities, Inc. (NYSE: ACC)

American Campus Communities, Inc. is an independent equity real estate investment trust. The firm invests in the real estate markets of the United States. It primarily engages in developing, owning, and managing high-quality student housing communities. The firm diversifies its functions across acquisition, design, financing, development, construction management, leasing and management of student housing properties. American Campus Communities, Inc. was formed in 1993 and is based in Austin, Texas.
To review American's stock, please take a look at the 1-year chart of ACC (American Campus Communities, Inc.) below with my added notations:
After a January to September sell-off, ACC has been trading sideways for the last 3 months. Over that period of time, the stock has formed a clear resistance level at $37 (red). In addition, the stock has also created a good level of support at $33 (blue). These two levels combined have ACC stuck within a common chart pattern known as a rectangle, and at some point the stock will have to break one of those levels.

The Tale of the Tape: ACC has created a common rectangle pattern. The possible long positions on the stock would be either on a pullback to $33, or on a breakout above $37. The ideal short opportunities would be on a break below $33 or on a rally up to $37.
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This Is Why I Shorted Microsoft MSFT Today

Trades don’t get easier than this one. I like clean charts with clean entries and well-defined risks. Microsoft has all of those…
To start, here is a weekly chart showing the October 2007 highs at $37.50 before getting crushed. The stock lost 60% of it’s value over the next 15 months or so. After being boring for a while, it finally got a little rally, but only back to the 2007 highs. Now that everyone is excited about it (92% bullish sentiment according to Stocktwits) – I think it’s an obvious fade:

So now that we know it’s something we want to short, it’s all about the entry and defining the risk. On Wednesday $MSFT was able to temporarily rally above that key $37.50 level from 2007. But as prices inched higher, momentum was already rolling over. Here is a short-term look using 10-min bars. Look at the bearish divergence between price and the Relative Strength Index plotted below.

We have an easy out. I can’t put a new position on unless I have well-defined risk, no matter how much I love the trade. In this case, I think you’ve got options. You can use Wednesday’s highs as a stop or you can wait until we’re below 37.50 and use anything above that as the stop. You can even use the Wednesday morning pop highs in the 37.70s. It really all depends on your risk tolerance and time horizon.

Easy trade. Right or wrong I can hold my head up high knowing that we got a good entry point with an extremely advantageous risk/reward ratio. That’s all I can ask for.

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91 Stocks With Dividend Increases in October

With so many factors triggering market uncertainty — like the timing of the Fed taper and a lackluster earnings season — investors continue to love their dividend stocks.

Especially with so many raising payouts in October…

It’s an interesting time for dividend seekers. According to Fidelity Investments, corporate cash balances sit at some $1.8 trillion — the highest in history.

Yet, payout ratios are still at 50-year lows. That suggests there’s plenty of room for dividends to rise.  (more)

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