JC Parets, CMT, Sees “Unlimited Downside Risk In The Market Right Now”

JC Parets, CMT, of AllStarCharts, was featured in MarketWatch Tuesday, echoing caution about divergences among several key market indicators. 

“There is unlimited downside risk in the market right now and I don’t think it’s being respected,” Parets said. “It’s not until afterwards that they ask, ‘what happened?’”

"He pointed to several divergences that should make clear to investors just how precarious the market situation is at these current levels. The first one is what we’re seeing in this chart of the S&P vs. the rest of the world," said reporter Shawn Langolis. (View the chart above.)

Parets also noted the divergence between the S&P Industrial Average and the Transportation Average.

"This idea here is that when either industrial or transportation stocks make new highs, it’s important for the other to follow. When that confirmation doesn’t come, there’s cause for concern," said Langolis. 

“We saw these divergences lead to collapses in 2000, 2007 and more recently a severe selloff in 2015,” Parets wrote on his blog. “You can see that with new highs in the Dow this month, transports put in a lower high, typical behavior at market tops.”

See the transportation chart divergence and read the full report on MarketWatch here: The stock market faces ‘unlimited downside risk,’ warns veteran trader