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Here's why it can get much worse: Technician

In the U.S. stock market, the tail could be wagging the dog.

According to top technician Carter Worth, the growing presence of exchange-traded funds is playing a significant role in the price action in equities. And by his work, that could lead to a lot more selling.

"A lot of individual stocks, it turns out, were being influenced not by what was going on at the stock level but at the ETF level. So a major selling in baskets, forcing stocks themselves to drop significantly, and not on a lot of volume," Cornerstone Macro's Carter Worth said on Monday's "Fast Money."

Last Monday, when the market experienced a 1,000-point drop, moves in the ETFs that track the major indices were not trading in sync with the indices themselves. Worth said that this is caused by knee-jerk "unnatural and robotic" selling in ETFs that can actually drag down the very index that it is tracking.

For example, Worth pointed out that the S&P 400 Mid Cap index dropped 13 percent last Monday on an intraday basis, while the ETF that tracks that index, SPDR S&P 400 ETF (MDY), fell 23 percent.

In the case of the Nasdaq 100, the index itself dropped 19 percent while the ETF that follows the index, Powershares QQQ Trust, fell 26 percent.

According to Worth, the divergence of ETFs from the indices they follow is a major red flag for the market.

"This is not a good situation. Indeed, it's a precarious one," said Worth. "Things were out of control in many ETFs last Monday and the market to some extent also was out of control."

By Worth's estimation, many of the extreme moves in individual equities was driven by forced selling in ETFs. For example, Worth noted that both Dow Components Home Depot and JP Morgan lost 20 percent of their value on an intraday basis last Monday. But total volume in those names was only slightly above average.

"Why couldn't the moves have been twice as big as they were?" Worth wrote in a note Monday. "The answer is—they could have been."