Crash Coming?

The next couple of trading sessions could spell disaster for the S&P 500 and investors should watch the index very closely for early warning signs of a crash, technical analyst and independent trader Bill McLaren told CNBC Friday.



"If the index goes to 1,040 and only bounces one day and the next day goes to a new low, be very careful because the time cycles in that pattern indicate there could be a crash scenario," McLarer said. "I doubt it, but if it occurs, look out."

The S&P [.SPX 1076.76 3.07 (+0.29%) ] closed 1.7 percent lower Thursday at 1,073.69 points after a late-session selloff dented the index. It has now seen four straight days of declines.

"The manner in which we got down has me really cautious. We had a large gap down, followed by follow-through, that's not a very pretty picture," McLaren said.

"I'd like to see the market hold in here today and then rally into September," he added.

Even though there is a risk of a severe decline, McLaren expects stocks to remain range-bound in the near term.

"I still think we're in a sideways move in indexes, but let's hope so," he said.

"Our forecast calls for this period of time to be a period of distribution because we're looking at a two-year bear trend once this distribution is complete," he added.