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Louise Yamada's stock chart models show we are way overdue for a big correction

  • Technical analyst Louise Yamada said that her models suggest that stocks are overdue for a correction.
  • "We're running about 18 months without even as much as a 10 percent correction," she said, noting that the next big selloff is likely to be "more than just 2 percent."
  • Yamada is founder and manager of Louise Yamada Technical Research Advisors, a research firm that provides in-depth technical analysis. She was the top-ranked market technician multiple times in her career by Institutional Investor.

Top Wall Street technical analyst Louise Yamada said her models suggest stocks are way overdue for a big pullback.

"The run from 2009 to 2015 was probably the completion of an entire part of the bull market. We had a pretty decent corrective trend, it wasn't a cyclical bear, but it was close," said Yamada. "But we're running about 18 months without even as much as a 10 percent correction."

Yamada is founder and manager of Louise Yamada Technical Research Advisors, a research firm that provides in-depth technical analysis of U.S. equity markets and interest rates as well as educational and think papers. CNBC's Mike Santoli spoke with Yamada in an exclusive interview for CNBC PRO.

"You had one [correction] in 2010, you had another in 2011, so I think maybe we're overdue for something. We've started to see, periodically, negative divergences that make you a little suspect as to whether the market may be due for some kind of pullback, more than just 2 percent."

The technician has good company in being worried about equities. Widely followed Bank of America Merrill Lynch strategist Michael Hartnett said last month that he's ready for a "significant moment" later this fall when the market will correct "quite meaningfully."

"It won't be your average correction. It's going to be something a little more meaningful. It will depend on a lot of factors," he said. These rising concerns comes on the heels of a long spell of bullish market news, with the Dow Jones industrial average and the S&P 500 notching records throughout the summer months and as recently as this week.

Yamada is heralded on Wall Street as a leading voice on market technicals. She was the top-ranked market technician multiple times in her career by Institutional Investor. Before founding her own firm in 2005, she was a perennial leader as the head of technical research at Smith Barney for 25 years. She the author of the book "Market Magic: Riding the Great Bull Market of the Century."

If investors get too nervous about their holdings, Yamada has a number of questions to determine whether it's time to dump an individual stock.

"Does your stock have something to reverse? Has it achieved its objectives? Has it violated an uptrend? If it's violated something like an uptrend, which probably means it's put in place a lower high and a lower low, take a little off the table."

"Has it violated support? Is the distribution significant? Violated support, significant distribution, take a little more off the table. Then, if it's violated support, your next question of course is: Has it entered a downtrend? You should be out of the stock by the time you can answer that question with as a 'yes.'"

See here for the full CNBC PRO report and the interview video.

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