Despite new record highs, a major technical indicator suggests that it's time to sell stocks, market bear Brian Kelly of Brian Kelly Capital said Thursday.



"I do think the market here is overvalued, and one of the things I look at when I'm managing money is the fact that price volatility is always so much greater than fundamental volatility," he said. "Earnings only change four times a year. So, I always look to see extreme cases."

The Dow Jones Industrial Average rallied 78.02 points to finish at 15,548.54, climbing above its previous all-time high set on May 22. The S&P 500 also topped its previous record, gaining 8.46 points to close at 1,689.37, and the Nasdaq eked out a gain of 1.28 points to end at 3,611.28.

(Read more: Dow, S&P 500 set record highs on Bernanke, upbeat earnings)

On CNBC's "Fast Money," Kelly cited a chart of the S&P 500 showing the average price-to-earnings expansion over the past four years, as well as four highlights:



A 10 percent decline, a 15 percent increase, a 20 percent increase and, most recently, a 7½ percent decline on May 22.

"As of today, we're back at that level again," Kelly said. "So, one of my rules is when we get to extremes, which I define as a 2 standard-deviation move, you have to, at the very least, lighten up. I tend to sell, and I'll look for something to short."

(Read more: Amid market highs, a few stocks still a 'buy': Pro)

Kelly invoked the Oracle of Omaha in making his case that stocks were now expensive.

"Warren Buffett's favorite measure, which is market cap – total market cap – to GDP," he said. "Today, it hit an all-time high. The total market cap in the U.S. hit an all-time high."

Earlier, the S&P 500 surpassed $15 trillion in value for the first time in its history.