‘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.

Brian Sullivan

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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