With the current bull market celebrating its fourth birthday by flirting with all-time highs, investors need to look hard for signs of where stocks are going from here.
Last week, the Dow Jones Industrial Average came within 20 points of its all-time record close of 14,164.53. Two weeks ago the Standard & Poor's 500 Index came within 31 points of its all-time high of 1,561.80.
Unfortunately, most market indicators are suggesting that the bull market that has carried U.S. stocks a long way from the lows of March 2009 is just about out of steam.
"There are a lot of measures that tell us markets are overbought at this point," Philip Saunders, head of multi-asset funds at Anglo-South African fund manager Investec, told the Financial Times. "Nothing goes up in a straight line."
That's not to say necessarily that we're facing a full-blown stock market crash, but that the likelihood of some sort of downturn has increased dramatically in recent months.
Many of the best indicators of a nearing change in the direction of stock markets are contrarian - that is, they appear to tell you the opposite of what you're currently observing.
But that's also what makes them valuable. No one wants to be the last person to leave the party, particularly when that party is a bull market.
Here are five indicators investors need to bear in mind:Five Signs of a Weakening Bull Market
Finally, it's worth noting that a recently created index, which incorporates indicators such as the VIX, as well as eight other technical, macroeconomic and fundamental factors, is also flashing a warning that this bull market is in danger.
The "Greedometer" - created by Jeff Seymour of Triangle Wealth management - was designed based on previous market crashes. Feeding the old data into the Greedometer shows that it looked the same in 2000 and 2007 - years that preceded stock market crashes - as it does now.
On Feb. 22, the Greedometer reached 7,900 on a scale of 8,000.
"Stock markets die of euphoria," Seymour told MarketWatch. "These are the signals you look for."
Related Articles and News: