The AVIV Ratio helps us understand how much profit (on paper) the average active investor is sitting on. This helps gauge if the market is overheated or has room to grow.

Bull markets typically end when all types of investors are showing big profits. This creates a problem: too many people want to sell to lock in gains, while fewer new buyers are willing to pay such high prices.

Right now, the AVIV Ratio hasn't hit its extreme level (+3σ). This suggests investors aren't sitting on excessive profits yet, meaning the market might have more upside potential before profit-taking becomes too tempting.