What to watch

How to spot cracks in bullish thesis for stocks

NEW YORK It might be time to start looking for cracks in the bullish thesis that has recently propelled the market to levels not seen in five years.

Stock market dips, pullbacks, corrections, or whatever term you want to use to describe a market in retreat, can occur at any time. Downturns lasting a day, a week or longer often occur after the market has been on a tear and seemingly invincible like it’s been since early June when investors began pricing in more Fed stimulus.

This heads-up comes after a notso-good day on Wall Street, where an early rally faded, leaving the Dow Jones industrials down more than 100 points and extending its losing streak to three sessions.

Often, these cracks show up on TV, as they did Tuesday when images of Spaniards protesting in the streets over pension cuts and tax increases reminded investors that Europe’s debt crisis hasn’t gone away. Cracks show up in news. Caterpillar, the largest maker of construction and mining equipment, lowered its 2015 forecast, citing a weak global economy, a reminder that subpar growth will be with us for a while. Cracks show up in streaks. The Standard & Poor’s 500 index has finished down four sessions in a row, a reminder that risks remain. Cracks also appear in market leaders such as iPhone maker Apple, which fell $17.25 Tuesday and is 4.1% below its Sept. 19 record high of $702.10.

A few bad days don’t mean the bull market is over. But for investors looking to buy the dip or lock in gains, tracking cracks in the bull’s armor is time well spent.