‘I hope you’re sitting down before I show you this next chart,’ says trader

For those who might be tempted to buy recent market dips, one technically minded trader says there's a chart that could be signaling bad news for the market, and investors may want to brace themselves.

"I hope you're sitting down before I show you this next chart," TradingAnalysis.com founder Todd Gordon said Wednesday on CNBC's "Trading Nation."

More specifically, Gordon believes that based on the performance of the S&P 500 sectors, it could be hard for the market to retake and break above the all-time highs it made Jan. 26. Of the 11 sectors that make up the S&P, Gordon points out that only the tech sector has broken above its Jan. 26 highs.

"Technology is doing the heavy lifting here. It's doing a great job, but unfortunately I don't think it's enough," he added.

In other words, it could be a while before the market returns to its highs.

As a result, Gordon wants to position for a move in the S&P 500 using options. Specifically, he is selling the S&P 500 ETF (SPY) April 16 weekly 275-strike call and buying the April 16 weekly 280-strike call for a $2.75 credit, or $275 per options spread.

If SPY closes below $275 on April 16 expiration, then Gordon would make the $275 on the trade. But if SPY were to rally and close above $280 on the expiration date, Gordon could lose $225.

"We are starting to hesitate at that last retracement level, which [tends to precede a lot of reversals]," he said. "So we're starting to get a bit of a double top at around the $280 region here in the SPY, and it looks like we might be heading lower."

The SPY was trading just above $275 on Wednesday as all three major market indexes gave up their gains from the morning open.

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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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