Technology

The MAP Technology ratio sits at 9.75%. This suggests that a bullish setup is near. This ratio looks for unsustainable selling. It measures how many tech stocks have shown a UI sell signal over the past five weeks. A level of 9.75% means that the outsized selling is likely overdone, which should trigger a reversal. Historically, it has been very accurate.

This morning, I went through our data to see what the forward returns were for the Technology Select Sector SPDR ETF (XLK) in each instance in which the ratio spikes through 8% (big selling).

Below are stats on the 8% level and why it is important:

There were only five times where the ratio spiked above 8%. This is a very rare event!

A couple of observations on XLK returns after popping above the 8% level: 

  1. The tech sector averages a +3.61% return three weeks later.
  2. It averages a return of +5.26% eight weeks later.

The table below details the five instances in which the ratio spiked above 8%:

Table showing spikes in MAP ratio for Technology Select Sector SPDR ETF (XLK)

Our data tells us that the tech sector could bounce sharply in the coming weeks. Prior high-scoring stocks in the tech sector will likely bounce the highest.

Have a look at the five instancein the below chart (red circle with yellow fill):

Oversold ratio for Technology Select Sector SPDR ETF (XLK)
Inflection point for Technology Select Sector SPDR ETF (XLK)
Chart showing spikes in ratio for Technology Select Sector SPDR ETF (XLK)

Discretionary

The MAP Discretionary ratio sits at 9.22%. This suggests that a bullish setup is near. This ratio looks for unsustainable selling. It measures how many discretionary stocks have shown a UI sell signal over the past five weeks.  A level of 9.22% means that the outsized selling is likely overdone, which should trigger a bounce. Historically, it has been very accurate.

This morning, I went through our data to see what the forward returns were for the Consumer Discretionary Select SPDR ETF (XLY) in each instance where the ratio spikes above 9% (big selling).

Below are stats on the 9% level and why it is important:
 
We have had only three instances in which the ratio has spiked through 9%. This is a very rare event!

A couple of observations on XLY returns after breaching the 9% level:

  1. The sector averages a +3.39% return three weeks later.
  2. The sector averages a return of +9.01% eight weeks later.

Below are the three times the ratio spiked above 9%:

Table showing spikes in MAP ratio for Consumer Discretionary Select SPDR ETF (XLY)

Our data suggests that the discretionary sector could bounce sharply in the coming weeks. Prior high-scoring stocks in this sector will likely bounce the highest.

Have a look at the three instances below (red circle with yellow fill):

Spikes in MAP ratio for Consumer Discretionary Select SPDR ETF (XLY)
Threshold for Consumer Discretionary Select SPDR ETF (XLY)
Chart showing spikes in MAP ratio for Consumer Discretionary Select SPDR ETF (XLY)

Materials

The MAP Materials ratio is at 10.69%. This suggests that a bullish setup is near. This ratio looks for huge amounts of selling. It measures how many materials stocks have shown a UI sell signal over the past five weeks. A level this high usually means the high selling is overdone, which should trigger a bounce. Historically, it has been very accurate.

This morning, I went through our data to see what the forward returns were for the Materials Select Sector SPDR ETF (XLB) each time the ratio spikes through 9% (big selling).

Below are stats on the 9% level and why it is important:

We have had only five instances where the ratio has popped above 9%. This is a very rare event!

A couple of observations on XLB returns after jumping above the 9% level:

  1. The sector is +4.80% on average three weeks later.
  2. The sector averages a return of +7.44% eight weeks later. 

Below are the five instances in which the ratio spiked above 9%:

Table showing spikes in MAP ratio for Materials Select Sector SPDR ETF (XLB)

Our data suggests that the materials sector could bounce sharply in the coming weeks. Prior high-scoring stocks in this sector will likely bounce the highest.

Below are the five times (red circle with yellow fill):

Spikes in MAP ratio for Materials Select Sector SPDR ETF (XLB)
Chart showing spikes in MAP ratio for Materials Select Sector SPDR ETF (XLB)

To learn more about Mapsignals' institutional signals, please visit our "About Us" page.

Disclosure: The author holds no position in XLB, XLK or XLY at the time of publication.