Consider this excerpt from Marketwatch.com:
Paul Mendelsohn, chief investment strategist at Windham Financial Services, said this week’s tamer-than-expected inflation data was another support for equities, which finished higher for the week…Mendelsohn said the Thanksgiving break may give market players time to assess the run-up in stocks. “The market is incredibly overbought. In addition, bullish sentiment has really skyrocketed which would be another warning signal. I’m participating in this rally, but…my antenna is up,” he said.
How does one go about assessing a run up in stocks? What does overbought mean in concrete terms, not just jargon speak? Bullish sentiment (which is exactly what?) would be a warning signal to what? Is there some kind of rulebook that defines when these warning signals happen and what you should do?