“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 which is more useful 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.