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Art Cashin: The market 'check engine light' is still on

Although markets are in the summer doldrums of low volumes and low volatility, Art Cashin, director of floor operations at UBS Financial Services, pointed to several market indicators that are making traders nervous.

The 1,700 point level "presented quite a problem for the S&P," Cashin told "Squawk on the Street" Friday, noting that the index challenged this level several times in the prior trading session, each time failing to hold above the level.

"I'm quite happy to see that at least this morning the dollar is rallying a bit and yields are up a bit," he added. "If we had continued with the pattern of yields, dollar down and stock market down, you would begin to wonder whether that was the economy was turning suddenly so bad that [the Federal Reserve] would not taper [or] that tapering would have no impact on the economy."

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Despite this positive sign, Cashin said that the "internals look a little damaged," pointing to the advance/decline ratio, ETFs being "not completely in sync" with their components and traders losing faith in the CBOE volatility index. "I don't think the .VIX works anymore, to tell you the truth," he added.

"Despite the fact that the .VIX is quiet, that tells me there's a little anxiety around, so the 'check engine' light is still on," Cashin said.

— By CNBC's Paul Toscano. Follow him on Twitter and get the latest stories from "Squawk on the Street" @ToscanoPaul

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