"One of the best indications of the speculative willingness of investors is the ‘uniformity’ of positive market action across a broad range of internals… I’ve noted over the years that substantial market declines are often preceded by a combination of internal dispersion, where the market simultaneously registers a relatively large number of new highs and new lows among individual stocks, and a leadership reversal, where the statistics shift from a majority of new highs to a majority of new lows within a small number of trading sessions.

This is much like what happens when a substance goes through a ‘phase transition,’ for example, from a gas to a liquid or vice versa. Portions of the material begin to act distinctly, as if the particles are choosing between the two phases, and as the transition approaches its ‘critical point,’ you start to observe larger clusters as one phase takes precedence and the particles that have ‘made a choice’ affect their neighbors. You also observe fast oscillations between order and disorder in the remaining particles. So a phase transition features internal dispersion followed by leadership reversal."

– John P. Hussman, Ph.D.
Market Internals Go Negative, July 30, 2007

By the time a bull market reaches its peak, investors have experienced numerous instances where the market has declined by several percent, followed by an advance to fresh highs. Indeed, the advancing half-cycle since 2009 has included 3 separate declines in excess of 10%, 9 interim declines in excess of 5%, and 17 interim declines in excess of 3%.

That apparent “resilience” during a bull market contributes to a distinct sort of complacency, illustrated by this quote from Barron’s Magazine on February 3, 1969, after the S&P 500 had already quietly started a bear market that would take stocks down by more than one-third over the next 18 months, and would leave S&P 500 Index below its 1968 peak even 14 years later: