3 technical reasons to be nervous about stocks

Technician: Investors are getting too bullish

With stocks near all-time highs, John Kosar says that the market has moved too quickly and that some elements now suggest that a correction could come soon.

"I'm a little nervous up here," the technician told "Futures Now" on Tuesday. "There are a lot of indicators we're looking at, including investor sentiment, that are about as frothy as they've been in about 10 years. So I think there are a lot of little thing that, as you add them up, show that you need to be careful up here."

Reason No. 1: Investors are too bullish

The market's extreme bullishness is a "contrary indicator," said Kosar, director of research at Asbury Research. He noted that the Investors Intelligence Survey shows an outsized number of bulls.

"This is about as bullish as this group has been," he said. "When these people are all on the boat, oftentimes the boat's getting close to tilting."

Such extraordinary sentiment often occurs just before a drop in the market.

"This isn't a timing tool; this doesn't tell you what do to tomorrow," Kosar said. "But this tells you, over the next several weeks, we're at a level where we could get some kind of a pullback the other way."

Reason No. 2 : Stocks have run too fast

"Intermediate-term market momentum is overextended, according to the MACD [Moving Average Convergence-Divergence] indicator," he said.

MACD measures momentum by subtracting the 26-day exponential moving average from the 12-day exponential moving average. The reading is elevated, and that worries Kosar.

"Previous instances of this have coincided with most of the meaningful peaks in the S&P 500," he wrote CNBC.com.

Reason No. 3: The calendar predicts weakness

The final reason for concern has to do with seasonality.

"This week is the third-weakest week in the S&P 500 based on data since 1957," Kosar said. "So this may be a time to watch for a little backing and filling."

Kosar is not completely bearish; he just advises bulls to be careful.

"Corrections can be postponed but cannot be avoided," he said. "When some of these metrics get to these levels, it's not a sell signal, but you need to start to protect what you have."

—By CNBC's Alex Rosenberg. Follow him on Twitter: @CNBCAlex.

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