Four Indicators for Stock Market Appear to Be Calling for Caution
The stock market's retreat from record territory has left many investors hungry for clues: Is this just a pause in a continuing upward climb, or are stock prices really in for a slide?</br></br>No one can say for sure, of course, but this could be a good time to step back from the market's day-to-day gyrations and take a look at some widely watched indicators. These measures -- financial ratios, trading patterns and the like -- have traditionally been viewed as stock-market signposts.</br></br>The gauges aren't perfect. Market professionals frequently disagree on how to interpret a particular reading. And many of the indicators are "far from reliable," said Alfred Goldman, director of market analysis for A.G. Edwards & Sons in St. Louis.</br></br>Still, the indicators can be useful in evaluating the market in light of longer-term trends. While these measures won't tell what stock prices are going to do tomorrow, they may help investors cut back their stock holdings when the market is vulnerable and increase their exposure when the risks are lower. The whole idea is to "play the probabilities," said Gerald Perritt, a Chicago newsletter editor and money manager.</br></br>Here's a guide to four popular indicators that several analysts say are now flashing caution signals: