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Cashin skeptical of record highs: 'We're really vulnerable'

The stock market has been rallying since the U.S. election in November as investors rush to take advantage of Donald Trump's promises of tax cuts and deregulation. However, not all investors have a similarly optimistic outlook.

"Well, we're significantly overbought now. I mean, I think we're really vulnerable in the sense that things like the advanced decline indicator is not keeping up with the rate of the rally," Art Cashin, UBS director of floor operations at the New York Stock Exchange, told CNBC's "Squawk on the Street" on Tuesday.

U.S. stocks scored new highs on Tuesday, with the Dow Jones industrial average advancing about 100 points, in addition to gains by the S&P 500 and the Nasdaq composite.

Cashin noted that "We're above, 8 percent above the 200-day moving average, getting very close to 10 percent above in the S&P. That's usually a warning signal."

He said this rise could be the market making a "celebratory over-move" due to the tax reforms that it anticipates Trump will make. Cashin said the markets anticipate "a showdown coming relevant to the State of the Union" address.

Trump has said he plans to cut the corporate tax rate from 35 percent to 15 percent and decrease income tax rates as well. Republicans have their own tax plan which includes a 20 percent corporate tax rate and a now-troubled border adjustment tax.

Cashin said he will be watching how bonds move next and whether West Texas Intermediate crude breaks out through $55. He was concerned that Trump could potentially face tea party opposition that could block his tax reform package.

"I think we're really coming to a point where you're going to see things change. I think the president is going to have to give at least some hint of details. If he just gets up and says 'I'm still working on this package and it's wonderful,' the market will be disappointed."

"We're building up to a very, very important time here."