MAP: Market triggers overbought signal (1/24/2018)

Our MAP ratio for the U.S. market triggered an overbought signal. Looking back at history, these signals have preceded large drops in the market.

Basically, institutional buying is too high and unsustainable. We expect the market could be primed for a pullback, or the velocity of the recent rally could slow. We are long-term bullish on the market and feel any meaningful pullbacks should be used as a buying opportunity.A couple points of reference:

  • The average 5-week return for IWM post the signal is -1.25%.
  • The last time this signal triggered was 2/21/2017 and IWM returned -4.52% four weeks later.