Expect a lot more pain for emerging markets: Trader

As markets around the world tumbled last week, one technician is seeing some very bearish signals for emerging markets and U.S. stocks.

Todd Gordon of TradingAnalysis.com attributed the recent plunge in the S&P 500 to turmoil in emerging markets. In turn, emerging markets have been driven by the decline in crude oil, he said.

Looking at the charts, Gordon noted that a few years ago, the S&P 500 Index exchange traded fund (SPY), the emerging markets ETF (EEM) and the U.S. Oil Fund (USO) had previously traded together before a drastic divergence took place.

"As the S&P 500 recovered and pushed higher, those emerging markets never recaptured those 2010 and 2011 highs. The divergence between emerging markets and the S&P started then," Gordon told CNBC's "Trading Nation."

With global stocks under pressure, "the S&P is now all of a sudden starting to take notice," he added.

Crude oil recently broke below $30, hitting its lowest level in 12 years. And as EEM breaks below critical support at its August 2015 lows, the S&P 500 may soon follow in its path, Gordon said.

The ETF has seen an even steeper selloff than U.S. stocks this year, falling more than 11 percent in the first two weeks of 2016. However, Gordon sees the emerging markets fund falling even farther, to the $20 level, which would be another 30 percent drop from where the ETF closed on Friday.

"Volatility should continue, and I see the emerging markets and commodities dropping," Gordon said.

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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

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