US Markets

Why you should sell the rally: Traders

Closing Bell Exchange: Dash for trash ending
VIDEO5:2705:27
Closing Bell Exchange: Dash for trash ending
Earnings on traders' minds
VIDEO1:2001:20
Earnings on traders' minds
Digging for a reason to trade
VIDEO2:3202:32
Digging for a reason to trade

Stocks closed higher Wednesday but trader Dan Nathan doesn't think the upward momentum will continue. Instead, he thinks investors should use the recent strength in the market to lessen their exposures to equities right now.

"It's typical of a bear market rally. I think you are going to see these really sharp countertrend rallies. I think a lot of the factors that made the bull possible over the last few years are really no longer in place here," the co-founder and editor of RiskReversal said in an interview with CNBC's "Closing Bell" Wednesday.

He thinks the only reason the market has rallied about 5 percent from its Friday lows is that investors were "caught offsides." China's market has been closed for the National Day holiday and reopens Thursday, he pointed out. Plus, crude oil has been "given a pass," with no indication that there has been any increase in demand that should have pushed the commodity up as it did, said Nathan, also a "Fast Money" trader.

Crude settled down 72 cents, or 1.48 percent, at $47.81 a barrel, giving back some of Tuesday's 4.9 percent surge. held just above $51 a barrel.

Traders work on the floor of the New York Stock Exchange.
Brendan McDermid | Reuters

Nathan said investors should be happen with the equity returns they've gotten.

"You have to realize that we've had one down year in the SP 500 since 2002 … at some point the party has to end," said Nathan.

Steve Grasso, director of institutional sales for Stuart Frankel, would also sell the rally. He believes oil prices are "definitely wagging the market right now" and will be watching to see what the U.S. markets do when China's stock market reopens.

Traders work on the floor of the New York Stock Exchange.
This could spur market rally, says portfolio manager

He also noted that stock buybacks have been a huge part of the upswing in the market, and third-quarter earnings are coming out and "don't look so great."

"I could see market maybe selling off to those recent lows and then rallying back November, December," he told "Closing Bell."

"Bigger scheme of things, I am looking for a bigger sell-off but [that] doesn't negate what I just said that could happen into year end as well."

With many corporate earnings and forward guidances expecting to disappoint, CNBC contributor Carol Roth is also not convinced the market rally will hold.

"I don't see where this rally has the steam. I don't see any good news that is going to continue to push it higher," she said in an interview with "Closing Bell."

Earnings are expected to be off by more than 5 percent, said Sam Stovall, managing director of U.S. equity strategy for S&P Capital IQ. The average beat is by 4 percent, which means earnings will still be underwater by 1 percent, he pointed out.

"The good news is that this is likely to be the trough quarter and each successive quarter heading into 2016 will be positive and better than the preceding one," he said.

— CNBC's Evelyn Cheng contributed to this report.

Berkshire Hathaway Live Event