UBS: Sell stocks now!

With markets grinding higher and fears of an imminent recession seemingly in the rearview mirror, it wouldn't be hard to think that the stock market has room to run upwards.

Don't get too excited, however, said the technical analysis team of Michael Riesner and Marc Müller at UBS. It looks like the top and subsequent drop may be coming soon.

"With the rally of the last few weeks and looking at our daily trend work, the SPX has reached its most overbought position since 2009!!" the analysts said in a note to clients Tuesday.

"Together with significant non-confirmations in our medium-term momentum work, and trading in the time window of our late Q1/early Q2 top projection, we see the market vulnerable for a significant reversal this week, which we would see as the beginning of a tactical top building process and subsequent correction into deeper Q2."

This is a reiteration of a call the two made last week, when they felt that the current rally was too good to be true. While the forecast is not the UBS house view, the team does have a good track record, calling the coming downturn in stocks on December 5 and its eventually rebound on February 11.

"From a cyclical aspect we expect an initial pullback into first week April towards 2000/1970," said the note.

"On the sector front, we are sticking to our last week's comment and would take profit in the overbought cyclical themes where we expect technology to form a lower high, whereas banks can outperform short-term on expecting higher yields and a steeper curve. We would sell commodity-related sectors, which we continue to expect starting a new significant down cycle into deeper summer."

If you want to dive into it, technical analysis emphasizes levels of resistance. These are levels which the market reaches and either bounces up or falls down from. Riesner and Mills say the S&P 500 has resistance at 2050, meaning it is unlikely to break through that level, which is the basis of that call.

In more simple terms, Riesner and Müller think investors should get out of stocks.

"We reiterate our last week's call and would use strength to sell instead of chasing the market on the upside," they said in the note.

So there's a warning.

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