From this corner’s view, this market is on the verge of falling hard, but people are not seeing it. With the market is so close to all-time highs, most are fixated on it making new highs, rather than paying attention to valuation or macroeconomic conditions, both of which present serious risks.

Markets can move up in the face of risks, in fact they often do. But the way in which they move up is also often an important tell. And right now, I see the action as negative.

This has only been happening for two to three days so far (it can last for weeks), but this market is being driven higher by smaller investors. Institutional investors are selling into the rallies. I am using volume levels to help me define this, because we can never be 100% sure until well after the fact, but this observation has held true in the past. This is a red flag.

It has been happening as follows:

The market increases early and drifts higher on very light volume. Declines are short lived, and buyers seem to come back on every dip. Good news is great, bad news is ignored, and neutral news is considered good. In the last hour of the day, regardless of news, selling pressure hits and volume levels spike.

This action can be seen clearly in the market ETFs: the SPDR S&P 500 ETF Trust SPY, -1.15% , the SPDR Dow Jones Industrial Average ETF Trust DIA, -0.85% , the iShares Russell 2000 ETF IWM, -0.26% and the PowerShares QQQ Trust Series 1 QQQ, -1.27%

After anemic volume levels for the better part of the trading sessions over the past two days, volume levels increased by about 50% in the S&P 500 in the last hour. In fact, on Tuesday, volume levels spiked by 37% in the last 30 minutes alone, and on the heels of these volume spikes, the markets have fallen relatively hard late. That is a red flag.

Traditional theory tells us that smaller investors take action at the open, and institutional investors take action at the close. Clearly this is not set in stone, but it is true that we often attribute late-day action to institutional activity, whether that be buying or selling. Many managers watch for this activity.

What I am seeing is consistent with that traditional theory.

The low-volume rallies also tell us that institutional investors are not, for the most part, buying along with smaller investors early in the day. Instead, they seem to be simply not selling, and by not selling, they are allowing the smaller investor to bid the market up; if there are no sellers, a small amount of buying could push the market higher, and that's what's happening.

I have argued that institutional investors are carrying more margin debt as a percentage of cash on hand than ever before, putting the cash/margin ratio at an all-time low. That hampers institutional ability to buy, but if they don't sell, the smaller guy can bid this up. That's what is happening here.

However, that cash-margin debt ratio also supports the notion that institutional investors are selling into the rally too, if for no other reason than to simply reduce margin-debt exposure.

Although I cannot be sure, I assume that most institutional investors recognize the valuation risks and the macroeconomic risks that exist today, and they are simply letting the smaller investor buy as they sell into the rally on what has been a consistent basis so far.

This can happen for days on end, but my experience has told me that it can be followed by aggressive declines, too. That means buy-and-hold investors should be taking action to protect themselves. Seeing this happen near all-time highs in the face of the macroeconomic and valuation risks makes it even more sensible to control risk.