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 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.