Learn from history: How to "escape the peak" in a bull market?

Although current market sentiment is rather heated, investors may still have some time before the real "exit moment" in this bull market.

According to the latest strategy report released by the team of Deng Yulin at Guolian Minsheng Securities on January 19, based on a combined assessment of valuation and trading dimensions, as of January 16, 2026, the current A-share market still has room before it reaches the top. Analysts point out that the current market valuation level is below previous market peaks, and though trading indicators suggest heightened sentiment, the core upward trend remains intact.

Analysts note that when the RSI indicator exceeds 70 and the sentiment indicator exceeds 80, this usually means the market is at a high level. However, confirmation of the peak still requires the MACD indicator to signal a "death cross" for trend reversal. Current data shows that although the RSI and sentiment indicators have entered high ranges, the MACD remains in a "golden cross" state, indicating that upward momentum persists.

This means that, although the market may face volatility in the short term, a hasty exit may not be the optimal strategy until key valuation indicators reach historical alert levels and the technical trend undergoes a fundamental reversal.

Valuation Signals Have Not Yet Flashed Red

Analysts say that from a medium- to long-term perspective, there are three core valuation signals for assessing whether the market has peaked, and currently none of these have been fully triggered.

First is the asset securitization rate (total market capitalization/GDP). Historical data shows that when this indicator approaches or exceeds 100%, it usually corresponds to market tops. For example, at the peak of the 2007 bull market, the indicator was as high as 110%, and in 2015 it reached 107%. As of January 15, 2026, this figure is only 82%, showing that asset prices still have room to rise relative to the size of the real economy.

Next is the equity risk premium (ERP). ERP measures the extra return investors require compared to risk-free assets. Typically, when ERP breaks through 2 standard deviations, the market is extremely overheated and high risk. Current data shows that ERP has surpassed 1 standard deviation, but has not yet reached the extreme level of 2 standard deviations.

Finally, the valuation of leading industries. At the peaks of previous bull markets, the leading industry at the time (such as computers in 2015, electrical equipment in 2021) usually saw price-to-earnings ratios (PE) surge more than 40% above the market average. Currently, valuations of leading industries are relatively reasonable, and have yet to show the extreme premium associated with bubbles.

Trading Perspective: Sentiment Overheated but Trend Intact

Compared with long-term valuation indicators, trading indicators can more sensitively reflect the market's short-term position and trend. Analysts have created a combined "position+trend" assessment model.

For position assessment, when the RSI (Relative Strength Index) is greater than 70 and a self-constructed sentiment indicator (proportion of stocks trading above their 30-day moving average) is greater than 80, the market is considered at a relatively high level. As of January 14, data shows RSI at 73 and the sentiment indicator at 81, indicating the market is indeed in an overbought and overheating state.

However, just being at a "high level" does not equate to a "top." The key to confirming the top is trend reversal—specifically when the MACD indicator turns from a "golden cross" to a "death cross" accompanied by bearish divergence. Reviewing the highs of 2007, 2009, and 2021, all saw a combination of "RSI overbought + sentiment overheated" alongside "MACD death cross." Presently, the market MACD is still maintaining a golden cross, showing the upward trend continues.

The report also analyzes auxiliary indicators such as turnover, turnover rate, and margin balance. Historical back-testing shows that simple turnover and turnover rate are not particularly effective in judging market tops and bottoms. By contrast, margin balance offers some reference value: when the margin balance as a percentage of floating market value approaches 2.5%, or the margin buying amount rises to about 11% of turnover, it likely corresponds to a stage market high.

Risk Warning and DisclaimerThe market involves risks, please invest cautiously. This article does not constitute individual investment advice, nor does it consider the unique investment goals, financial status, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article fit their particular circumstances. All investment decisions based on this article are at your own risk.