They don’t ring a bell at the top, the expression goes, but here’s an indicator that topped in 2000 and 2007.
It has to do with margin debt. According to Ned Davis, senior investment strategist at Ned Davis Research, falling margin debt growth, from high levels, triggers a sell warning. When the 15-month rate of change in margin debt falls below 48%, the market was lower three to 18 months later, on average.
Another warning sign is that price-to-earnings ratios on what the firm calls institutional grade stocks are stretched.
Yet Davis can’t quite bring himself to fully cloak himself in pessimism. Short-term sentiment is still negative, he points out, which usually is a good sign for markets.
“I would note however, that following any rally, a break of the December low is often a warning sign. So we will be watching the year-end rally closely,” he says. The S&P 500 touched its lowest level for the 12th month on Dec. 3, when it reached 4,495.12.
The chart
It’s already out of date, but this chart showing all-time highs for the S&P 500 SPX,
The buzz
U.S. President Joe Biden and Russian President Vladimir Putin are due to have a call at 3:30 p.m. Eastern, according to the White House schedule, to discuss tensions in Ukraine.
Johnson & Johnson JNJ,
Outdoor mask wearing will be compulsory in Paris, as England prepares hospitals for an omicron wave. The daily average of U.S. coronavirus cases topped 300,000, a record, with hospitalizations at a two-month high.
Initial jobless claims fell 8,000 to 198,000 in the week ending Dec. 25. Chicago PMI data is due shortly after the open.
Samsung Biologics 207940,
Didi Global DIDI,
Credit Suisse CS,
Ghislaine Maxwell was convicted on five of six charges in the Jeffrey Epstein sex abuse case.
The market
U.S. stock futures ES00,
Top tickers
Here are the top tickers on MarketWatch, as of 6 a.m. Eastern.
| Ticker | Security name |
| TSLA, |
Tesla |
| AMC, |
AMC Entertainment |
| GME, |
GameStop |
| DXY, |
U.S. dollar index |
| TMUBMUSD10Y, |
U.S. 10 year Treasury |
| DJIA, |
Dow Jones Industrial Average |
| NIO, |
NIO |
| NAKD, |
Naked Brand |
| ES00, |
E-mini S&P 500 futures |
| AAPL, |
Apple |
Random reads
After two decades in space, the International Space Station is due to shut down. Here’s what comes next.
Meet the kids named after Harry Potter characters.
Need to Know starts early and is updated until the opening bell, but sign up here to get it delivered once to your email box. The emailed version will be sent out at about 7:30 a.m. Eastern.
Want more for the day ahead? Sign up for The Barron’s Daily, a morning briefing for investors, including exclusive commentary from Barron’s and MarketWatch writers.
