The latest margin debt figures were released last week and they show leveraged investors continue to delever. In fact, margin debt is now falling at an annual rate of 15%, a level of derisking that has always been accompanied by a minimum 20% decline in the S&P 500 over the past half century.

This makes this latest episode of derisking fairly unique. There have only been a couple of other precedents in which stocks rose or were flat year-over-year while margin debt fell at at least a 15% rate: May of 1969 (margin debt down 15%/stocks up 10%) and June of 1973 (margin debt down 18%/stocks flat). January of 2001 (margin debt down 20%/stocks down 1%) also comes very close.

In all three cases, the significant derisking on the part of leveraged investors was a good warning sign a bear market was already underway. And if the current derisking proves to be another sign of a nascent bear market, there is a record amount of potential supply for the stock market to absorb this time.