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Stocks are ‘teetering on a technical breakdown,’ trader warns

The market now finds itself on unstable footing, with two sectors in particular sending warning signs, according to Todd Gordon of TradingAnalysis.com.

"We have a market that is teetering on the brink of a significant technical breakdown," Gordon said Tuesday on CNBC's "Trading Nation."

Gordon views the consumer discretionary and health-care sectors as potential problem areas for the market.


Consumer discretionary is one of the few sectors that is down on the year. And recently, the ETF tracking the group (XLY) has fallen to a level of support, according to Gordon.

Within the sector, traditional retail stocks such as Kohl's and auto stocks such as Ford have been among the hardest hit in 2016.

Gordon views health care as another sector worth watching. This happens to be the worst-performing sector within the S&P year-to-date. And it now finds itself at a crucial level, according to the chart-minded trader.

"This one also, right down to the test of uptrend support and the decision level, is upon us," Gordon said. That support level would be $71, or just $0.60 below where the ETF closed on Tuesday.

Conversely, technology is showing strength. Looking at the chart of technology-tracking ETF XLK, Gordon notes that it has shown "pretty good relative strength," and unlike the other ETFs mentioned, it is trading a good deal above its relevant support level.

However, he doesn't think technology will be enough to keep the rally going.

"If XLY and XLV break, that's going to weigh on the broader markets — even the relative strength of technology might be pulled down, so that's where we're going to be watching," Gordon explained.


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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.

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Brian Sullivan is co-anchor of CNBC's "Power Lunch" (M-F,1PM-3PM ET), one of the network's longest running programs, as well as the host of the daily investing program "Trading Nation." He is also a frequent guest on MSNBC's "Morning Joe" and other NBC properties.

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