S&P is just inches away from doing something bad: Technician

With stocks sliding Thursday, one trader says more pain is ahead for the S&P 500.

The benchmark index has tumbled about 2.6 percent since hitting record intraday highs in mid-August. According to Evercore ISI technician Rich Ross, the market is set to drop another 4 percent.

Looking at a chart of the S&P 500-tracking ETF (SPY), Ross notes that the market has actually returned to the levels at which it was trading before the U.K. referendum to leave the EU.

Moreover, Ross takes the chart back one year and spots a "critical neckline of support" extending from November 2015, when the SPY was at $212, to present levels.

"You've essentially erased any of those post-Brexit gains, and you're sitting on that key neckline of support," said Ross. "Our call is that you break lower beneath the neckline," he added Thursday on CNBC's "Trading Nation."

Once that happens, how low could the market go? Ross subtracts $212 from the SPY's year-to-date highs at $219 to determine that another 7-point move down could still be possible, meaning that SPY could fall to $205 — a 4 percent decline from current levels.

That would almost completely take out all of the S&P's gains on the year.


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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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