“Davidson” submits:

One of the lessons of history is that market lows have always been identified by extreme levels of pessimism. The use of margin(borrowed funds) and futures to enhance returns is a reflection of investor optimism/pessimism. Optimism often proceeds market tops but it is pessimism that is more useful in identifying market lows, especially extreme pessimism. The Year-over-Year change in margin use reflects the rapid development of pessimism of past significant buying opportunities. Not surprising should be the correlation with the Net Non-commercial Futures Positions.

The current environment is as pessimistic as any of past periods which proved later to have been significant opportunities to add capital to equity markets.

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