Stocks Vulnerable With S&P 500 Leverage At All-Time Highs (SPY)

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August 11, 2017 10:04am NYSE:SPY

leverage bull bear 600X300

From Palisade Research: The total company leverage is calculated as debt to EBITDA or free cash flow. This metric is commonly used to assess a company’s ability to service its debt.

When we first published this chart, it appeared there was still some runway left, as market caps were increasing in tandem. However, the ratio has now reached a record high, signalling that debt loads are at capacity. It appears the S&P 500’s torrid pace is running out of fuel, and it will be interesting to see how companies will continue to fake their growth.

As depicted by debt margin, investors are borrowing at record levels to buy shares. Speculators are still trying to squeeze out as much as they can from an overbought market, and will be vulnerable to a sell-off. Once the selling begins, it will be exaggerated as investors begin to unwind their positions. This will bring about market capitulation, and even more downside for an extended time.

The SPDR S&P 500 ETF Trust (NYSE:SPY) was trading at $244.03 per share on Friday morning, up $0.27 (+0.11%). Year-to-date, SPY has gained 10.18%.

SPY currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #1 of 118 ETFs in the Large Cap Blend ETFs category.

This article is brought to you courtesy of Palisade Research.

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