Futures Now

A chart trend could spell a downturn of at least 3% in stocks: Technician

Here's why investors may want to brace for a market correction
VIDEO1:5301:53
Here's why investors may want to brace for a market correction

This week's stock market's tumble may signal a much bigger downside lies ahead.

Technician Scott Redler is noticing an ominous trend in the charts that could temporarily pull the Index down by three to five percent.

"We could be at a short-term top," T3Live.com's chief strategic officer recently said on "Futures Now."

Redler argues a late August correction isn't so unimaginable — especially as concerns about North Korea's nuclear intentions escalate.

"The 50-day moving average is a key for the intermediate trends. We may have lost some momentum, but at this point we haven't been below the 50-day pretty much for the entire year. So, so this is a key spot," he said. "If we end up holding it, we may see a little bit of a bounce."

Redler said investors should write down the numbers 2381 and 2332 on the S&P 500. If the trend line breaks, it could signal a move higher.

"That would probably be a good spot to put some longer term capital to work," he said.

Even with Friday's positive day, the stock market closed lower for the week. The S&P 500 and Nasdaq both fell by about a percent and a half over the past five sessions.

"Historically, it's August. We should be in a corrective period anyway," Redler said. "Volatility is great for traders. We haven't had it in a while. So, we'd love to see it stay."