Key indicators point to a sharp market decline After an extremely long topping-out period, several key indicators are pointing to dangerous market conditions. Let’s look at the facts: 1. Job growth is weak On April 3, the jobs numbers were released, and they were horrible. Analysts expected the economy to add more than 250,000 jobs for March, but only 126,000 jobs were created. This is another clear indication that the economy is weakening. Many are blaming the strong U.S. dollar DXY, -0.46% for the poor numbers (the dollar has increased by 13% since June 2014). The only silver lining is that the Fed will probably not raise interest rates this June. 2. ‘Hot’ money is flooding the market In February, some $58 billion poured into exchange-traded stock funds. ETFs are the new darlings of the investment world. More than $1.28 trillion is sitting in U.S. equity ETFs, according to the Investment Company Institute, a fund-industry trade group. Enormous sums of money are traded in the SPDR S&P 500 ETF TrustSPY, +0.16% every day. This is hot money, which could be dumped at the first sign of a price breakdown.If volume goes up and prices go down, that’s bearish Based on these numbers, in fact, I can deduce that many investors are in a panic-buying mode. I suspect these are professional investors or wealthy individualswho are afraid of missing out on higher returns. At every market top, you get the dumbest of the dumb buying because they don’t want to miss out. Yes, even pros can be dumb — especially if their peers are doing better than they are. 3. The top has been made It’s possible that March 20 was the top of this bull market. On that day, more than 2.5 billion shares changed hands in the last 30 minutes of trading. As investors poured into the market, something surprising happened. At 3:30 p.m. ET, the Dow was up 194. At the close, the Dow was up 168. What does that tell us? It means that the panic buyers were met with an even stronger force of sellers. Trading volume since has not come close to those levels. Volume Rule No. 1: If volume and prices both go up, that’s bullish. Volume Rule #2: If volume goes up and prices go down, that’s bearish. March 20 accordingly was a bearish day, even though the market was up. 4. Rallies have no legs One-day rallies are the new norm. Consider: the closing high of the S&P 500SPX, -0.21% was 2108. It hasn’t neared that level for a long time. If this bull market still had legs, the S&P 500 would have blown above 2100 with ease. The fact that it didn’t is another red flag. 5. The NYSE tick is telling Described in detail by market wizard Mark D. Cook, the NYSE tick has been weak. On the days the market has rallied, the tick has not surpassed 1000, a hugely bearish sign. If these rallies were the real deal, then the tick should reflect it. The fact that the tick has been weak is another indication that buying pressure has weakened considerably. 6. Sentiment is complacent The CBOE Volatility Index VIX, +0.27% suggests that investors do not believe the market will go down by much, if at all. And should stock prices fall, investors will consider this a buying opportunity. The market has been dangerous for months now, but investors aren’t selling. In fact, they’ve added to stock positions. Before every major market dislocation, most investors don’t see trouble until after they’ve lost big. What should you do now? Sell some winners. If there’s anything we’ve learned from previous markets, paper profits disappear in a heartbeat during a vicious correction or bear market. Based on current sentiment and technical indicators, this is the time to protect profits and not be greedy. The prudent action is to raise cash before the topping-out process ends with a market plunge. Michael Sincere