There's a warning sign flashing for stocks, but it's not coming from the equity market. Instead, it's coming from the bond market.
High-yield bonds, which often serve as a proxy to where the stock market is going, has been selling off sharply, with the two largest high-yield bond ETFs, the HYG and JNK, trading at the lowest level since November 2011. And according to one expert, the recent pullback is a noteworthy sign of what's to come for stocks.
"If you look back to [past] selloffs, when the high-yield market dramatically underperforms in a short period of time, it's a very good warning sign for equities," Larry McDonald said Wednesday on CNBC's "Trading Nation." Since the market's last significant pullback in October 2014, the S&P 500 and HYG have seen a substantial divergence, as the S&P 500 is up more than 9 percent and the HYG is down nearly 5 percent.