Observers also note that sentiment indicators appear to be bullish.
The weekly AAII Investor Sentiment Survey, for example, has been showing a growing number of bears among those surveyed — a bullish sign given that this index, which measures the mood of individual investors, is considered a contrarian indicator.
During the week ended May 5, which was near the end of the most recent stock-market rally, AAII bears represented 29% of those polled. For the week ended Aug. 18, after a 6% slide in the market, 42% of AAII members were bearish.
By way of contrast, when the market was approaching its nadir in early March 2009, 70% of AAII members were bearish — confirming the index's contrarian value since stocks started a strong ascent shortly thereafter.
Since the survey began in 1987, its average bearish reading is 30%.
Sentiment indicators overall are at best a mixed predictive tool, said Jason Goepfert, president of Sundial Capital Research, which tracks measures of investor psychology.
“Sentiment only rarely slides to an extreme, and right now we're not seeing it” either way, he said.
Observers of the Hindenburg Omen and similar measures say that once closed-end funds and other non-operating companies are excluded from the universe of stocks, these indicators don't actually point to the exits.
Besides, the record for the Hindenburg signal is mixed, Ned Davis, president of Ned Davis Research Inc., wrote last Monday in a research note. It gave timely sell signals in October 2007 and June 2008, but it also gave false warnings in 2004, 2005 and 2006, as well as in the 1990s, the firm noted.
The iffy track record aside, “a period with a lot of new highs and new lows is a sign of an unstable tape that often leads to trouble,” Mr. Davis wrote.
Advisers who use technical tools to make tactical investment decisions foresee the market running into more trouble over the next few months. Many were worried when the S&P 500 recently approached 1,050, which they view as the market's testing of a key support level.
When looking at market performance through a technician's eyes, a head-and-shoulders chart pattern, with the April highs forming the head, could indicate that the market is rolling over to the downside if the shoulder made at around 1,050 is broached for good, advisers say.
“If it breaks down a little further, and if [the market] doesn't stabilize, we could be looking at 830” for the S&P 500, based on past support levels, Mr. Hepburn said.
“If the market holds below  for a couple of days, 900 to 950 is the next support” level, said Brian Carruthers, founder of Brian Carruthers & Associates, which manages about $100 million.
The uptrend since March 2009 was broken with the July lows, Mr. Hepburn said. “The rally in July had the potential to re-establish the uptrend — and it failed.”