The 1st big danger sign is that markets begin making a series of lower lows and lower highs. Almost often during this procedure previous highs become struggle and last lows keep getting breached with regularity. This is mark that sellers have taken over. Sellers appear each time the market rallies and sell into power, resulting in important and sustained downside for the market.
The 2nd indicator is that large gains in the market will be reversed very fast. Thus all the gains are lost within a few days. In simple words, there is no help for the market at top levels and sellers who are in control of the market stop the market from making any headway.
The 3rd indictor is that FII (Foreign institutional) money flows begin to dwindle.
Flls in India for example control over 30% of the stock market inflows. If the selling trends continues over the upcoming months we could simply enter a bear market.
The 4th indicator is that outflows of finance cause the domestic currency to weaken considerably. Weak domestic currencies tie down the hands of policy makers like the domestic central banks who will have to increase interest rate to help the weak currency. This would be detrimental for the economy at big as top interest rates put a clamp on spending that is needed to stimulate the economy.
The 5th big sign is wild overvaluation in the stock market. Dividend yield analysis and Earnings can be used to see if the total yield from dividends and earnings is larger than the risk free rate of return. If the risk free rate is considerably up than the total yield it will lead investors to reallocate assets from danger asset classes like stocks to danger free assets like government bonds.
The above indicators are perfectly monitoring and can serve as early alerts of a bear market that is quick approaching.