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Alternative Market Briefing

Cash balances in margin accounts drop, triggering sell signals; leverage climbs higher

Wednesday, March 06, 2013

Bailey McCann, Opalesque New York: A sell signal was triggered on January NYSE Margin Debt Data, the actual balance was a negative $77.2m, according to new data from lead hedge fund analyst Mary Ann Bartels at Bank of America Merrill Lynch Global Research. Bartels notes that, "the last time a sell signal was generated was on April 2010 and the S&P 500 subsequently corrected by 16% in two months." Data also shows that hedge funds continue to underperform the equities market, February flash return was up 0.33% as of Feb 27, compared to a price return of 1.19% for the S&P 500.

Leverage, as measured by NYSE Margin Debt, rose 31.6% year-on-year (YOY) and 10.2% month-over-month (MOM) to $364bn in January, compared to the July 2007 peak of $381bn, data shows. The investable hedge fund composite index was up 0.33% for February as of February 27 2013, compared to a price return of 1.19% for the S&P 500. In terms of strategies, Convertible Arbitrage performed the best, up 1.23%. CTA Advisors performed the worst and were down 0.55% for the same period.

Funds sold NASDAQ 100 futures, were flat the S&P 500, and bought the Russell 2000. In commodities, funds bought soybean, sold corn, and added to their shorts in wheat. In currencies, funds sold Euro, bought USD, and are essentially flat the Yen.......................

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