This could be a scary sign for market—or not
There are some clear warning signs for stocks as October ends, but traders also caution that the market keeps defying every bearish trend.
Maxim Group's chief technician, Paul LaRosa, points out that Wednesday's negative action in the high-flying Russell 2000 and Nasdaq raised some red flags, and he has become more circumspect about the market as a result.
"The Nasdaq and Russell had an outside day, which is where the trading range trades above and below the prior day's range and closes below the prior day's low," LaRosa said. "That happened in both the Nasdaq and Russell. In the S&P 500, it almost happened."
LaRosa said the Nasdaq closed at 3,930, below the prior day's close of 3,935; the Russell 2000 closed at 1,105, below Tuesday's low of 1,114.
The behavior in the Dow Jones Industrial Average was also not good. "The Dow got to a new high intra-day and then closed near the low," he said.
(Read more: 'Severe risk' of 'financial crisis': Paul Singer)
"The last time there was an outside day was May 22. Then it was all four indices, and it led over the next month to about a 6 percent selloff," LaRosa said. "I think there's a possibility we sell off in the 3 to 4 percent range."
Stocks finished Thursday near their lows after bouncing around. The Dow lost 73 points to 15,545, and the S&P 500 was off 6 at 1756. The Nasdaq slipped 10 points to 3919, and the Russell 2000 lost 5 points to 1100.
The Russell and Nasdaq are the best performers this year, both up nearly 30 percent. Since the Oct. 9 lows, the Nasdaq has outpaced other indexes and is up 7.4 percent, while the S&P has risen 6.7 percent. The Russell is up 6 percent. The Dow, up 5.6 percent since then, has gained 19 percent year-to-date, and the S&P is up 23 percent.
"It's a good spot to take down some risk, so you can figure out whether this time could be a little different," said Scott Redler, who follows short-term market technicals at T3live.com. He said the market took it in stride early in the day. "Yesterday was a good day to take down some risk, and today somewhat confirms it. Things are starting to bend, but are not broken," he noted.
Redler said the market tried to push higher but more selling pressure came in at the close. "If new monthly inflows don't help (Friday) - it seems like we can be on our way to at least a test of the prior September high of 1729 which also corresponds to the 21-day, which would be healthy," he added.
Redler said he took risk off and went home net short Wednesday.
"All these warnings signs haven't added up to much. You want to acknowledge them, but yesterday's weakness led to a move lower this morning, but now we're back above it. Every time you think there's a warning, it turns out to be just a pause," he said.
Stocks rocketed in October, even as major investors—including Bill Gross and BlackRock's Larry Fink—warned this week of markets looking bubbly.
(Read more: Gross: The market and all asset prices are bubbly)
"You've seen signs of stalling out," said Mark Newton, chief technical analyst with Greywolf Execution Partners. "It is a bad sign and at least a warning sign that we're probably at the very least going to consolidate, and I see a lot of stuff that says we should pull back in the next few weeks."
One of those signs is the amount of bullish sentiment, but more the lack of bearish sentiment, in investor surveys. The number of bears in the American Association of Individual Investors survey increased this week but is still well below average.
Bearish sentiment, expectations that stock prices will fall over the next six months, rose about 4 points, to 21.5 percent, still well below the historical average of 30.5 percent for a third consecutive week, according to the AAII survey.
(Read more: Why best and brightest are turning against Wall St.)
James Paulsen, chief investment strategist at Wells Capital Management, said there could be a pullback though he sees a market driven by improving confidence.
"Sentiment seems a little optimistic," he said. "I wouldn't be surprised if we have a short-term pullback in here. I don't think it would be a big one, but a short-term one that gut checks sentiment wouldn't be surprising."
—By CNBC's Patti Domm. Follow here on Twitter @pattidomm.