Canary in a coal mine? The drop in this ETF has traders worried

Traders work on the floor of the New York Stock Exchange.
Brendan McDermid | Reuters

If there's a tip of the arrow in the red-hot momentum names, it's been the biotech sector, so with a meltdown in that group traders are watching it for clues on whether a deeper stock market decline is on the horizon.

Volatile momentum names sometimes lead market shifts, and with biotech at the fore, traders have been watching the IBB, iShares Nasdaq Biotechnology ETF. It has been breaking down and is off more than 8 percent this week. The IBB fell through its 50-day moving average and was teetering on its 100 day—at about 331 Thursday afternoon—as the broad market declined.

"The IBB has been leading us lower, and it feels like the major indices are starting to catch up," said Scott Redler, partner at Biotech and health care in general have been market leaders this year.