I was blindsided in 2007/2008 when the market turned. How can I tell if the markets are getting ready to do it again?
A: By remembering this fundamental truth: Healthy markets have strong internals. What I mean by that is broad swathes of the market go up in unison, rather than just a few big name stocks that camouflage general weakness.
You can check yourself by examining the number of advancing versus declining issues – the number of stocks that are going up next to the number of stocks going down – in most charting services.
At StockCharts.com, for example, key in “$NYAD”, check “cumulative” in the “type” window, and then hit refresh. (StockCharts is just the first example that came to mind. There are plenty of other excellent free charting services out there.)
When it’s rising and making new highs, that’s a sign of strength. When it’s falling, things are weakening.