John Hussman does the best long-term statistical analysis of the broad equity market, bar none. He has identified a set of four conditions that has appeared at or just before significant tops in the stock market:
Overbought: S&P 500 within 3% of its upper Bollinger bands, at least 7% above its 52-week smoothing, and over 50% above its 4-year low
Overbullish: Investors Intelligence sentiment survey shows bulls above 52% and bears below 27%
Overvalued: Shiller P/E above 18 (it’s currently 23)
Rising yields: 10-year Treasury yields above their level of 6-months earlier.
This condition also appeared in 1929 (followed by a crash and 20 year bear market in real terms) and 1964 (stocks peaked in ’66 before going down 80% in real terms over the next 16 years). When stocks are overbought and overvalued, treasuries have fallen, and most investors are bullish, it is to your great advantage to eliminate market risk (sell your stocks or hedge them).