The 'bizarrely' overvalued stock market is poised for a big correction and the smart money is moving into cash, chief strategist says

• Indicators are pointing to a major correction coming for stocks, market strategist Paul Dietrich says. 
• The B. Riley Wealth chief investment strategist says the market is "bizarrely overvalued."
• The "smart money," according to Dietrich is moving money into cash. 

The stock market looks "bizarrely" overvalued and indicators are pointing to a big correction on the way, according to Paul Dietrich, chief investment strategist of B. Riley Wealth.

Speaking to Yahoo Finance, Dietrich pointed to a handful of indicators in the market, which are all flashing a collective warning sign for stocks. 

Red flags are arising in the price-to-earnings ratio of the S&P 500, and multiples mirror levels seen prior to the dot-com bubble crash. 

"Every single indicator seems to tell us we're in a historic, historic bubble," Dietrich said. "It's hard to look at that and say that we're not going to see a major, major correction coming. Now is not the time to be putting new money in the market," he warned.

The biggest indicator of a coming correction is "smart money" investors, who are moving out of the stock market and into safer cash equivalents, Dietrich said. He pointed to recent stock sales from billionaires like Jeff Bezos, Warren Buffett, and the Walton family, the heirs to the Walmart empire, as a sign big investors sense the market is poised to correct.

While sales by insiders or big shareholders are often scheduled in advance, they can also be a sign that investors are concerned the market is approaching a peak, Dietrich suggested.

"There's just no ambiguity here. It is bizarrely overvalued," Dietrich said of the stock market. "You're seeing the smart money right now moving massive amounts into cash … It's not that they don't believe in their companies. They do. They know it's just completely overvalued and if they sell it now, they can buy it back cheaper later." 

It's unclear what could trigger a coming stock correction, Dietrich said, noting that prior crashes, like the one that preceded the 2008 crisis, were sparked by unpredictable, Black Swan events. A spike in oil prices as a result of geopolitical conflict, or more regional banking troubles stemming from the commercial real estate sector, could set the downfall for stocks in motion, he speculated.

Dietrich has cast himself among the most bearish of Wall Street forecasters at a time when most investors are still feeling bullish about stocks and the economy. Previously, he predicted that the stock market could crash as much as 40% if the US encounters a mild recession.