This Metric Strongly Suggests a Major Correction in the S&P 500 Could Be Coming (+2K Views)

History shows that when investors experience a rapid decline in the amount of available cash in their brokerage account to spend/invest quickly such “negative net worth” leads to major corrections in the stock market. Currently such is the case so can we expect another such decline or will it be different this time?

So writes Chris Kimble (www.kimblechartingsolutions.com) in edited excerpts from his post* entitled Cash levels in Brokerage accounts approach lowest levels in history!

This post is presented compliments of www.munKNEE.com (Your Key to Making Money!) and may have been edited ([ ]), abridged (…) and reformatted (some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement.

Kimble goes on to say in further edited excerpts:

Negative Net Worth is defined as the amount of cash available to spend/invest quickly i.e. the net credit balance in one’s account consisting of free credit cash and credit balances in one’s margin account less one’s margin debt minus margin debt.

The chart below, created by Doug Short, reflects such a rapid decline in available cash/net worth this past month.

CLICK ON CHART TO ENLARGE

As can be seen in the chart above there were very few times over the past 13 years where negative net worth dropped as low as at present without a major drop in the S&P 500 following shortly thereafter. Will it be different this time?

Editor’s Note: The author’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor.

*http://blog.kimblechartingsolutions.com/2013/03/cash-levels-in-brokerage-accounts-nears-lowest-levels-in-history/

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< noscript>The S&P500 is likely to achieve a secular (long term) peak this month, then drop to the 500s by July-August 2013. This article explains why. Words: 180

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< noscript>Based on the latest S&P 500 monthly data, [my analyses indicate that] the  market is overvalued somewhere in the range of 33% to 51%,  depending on which of 4  indicators I used. This is an increase over the previous month’s 31% to 48% range. [Let me explain the details.] Words: 475

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15. Will a Black Swan Event Cause the S&P 500 to Drop by 40%?

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< noscript>Mark Spitznagel…warned the other day that the S&P 500 could lose 40% of its value in the next couple of years. So what black swan event could cause the S&P 500 to drop down to 760? [Let’s take a closer look.] Words: 856