Is The Market On The Verge Of A Steep Decline? This Pro Says Yes

Thomas H. Kee, Jr. is the president and CEO of Stock Traders Daily, and he doesn't have an optimistic outlook for the market.

Kee wrote an article for Market Watch in which he argued that the stock market is "on the verge of falling hard," as market participants are "fixated" on pushing stocks to new highs instead of focusing on valuation and macroeconomic conditions — both of which "present serious risks."

The market pro noted that the markets are are beginning to show troubling signs, specifically: 1) stocks began a trading session on a positive note and then drifts higher on very light volume; 2) declines are short lived, as investors are buying on every dip; 3) good news is "great," but bad news is "ignored" and neutral news is now considered "good" news; and 4) selling pressure begins in the final hour of trading and volume levels surge.

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"After anemic volume levels for the better part of the trading sessions over the past two days, volume levels increased by about 50 percent in the S&P 500 in the last hour," Kee explained. "In fact, on Tuesday, volume levels spiked by 37 percent in the last 30 minutes alone, and on the heels of these volume spikes, the markets have fallen relatively hard late. That is a red flag."

Kee added that traditional theory dictates that smaller investors are active at the market open while institutional investors take over towards the close. This pattern has shown itself many times in the past, which ultimately results in "aggressive declines."

Accordingly, buy-and-hold investors should start looking at ways to protect their holdings, especially as the market flirts with new all-time highs.