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This is giving a sense of a major top: Jim Paulsen

Stocks tumbled Tuesday and widely followed strategist Jim Paulsen thinks the decline isn't over. He believes equities will continue to head lower, with a likely correction in the cards.

There are several factors at play, Paulsen said in an interview with CNBC's "Power Lunch" on Tuesday.

For one, there has been a continual failure of stocks to rise to and extend a sustained rally.

In fact, if the S&P 500 finishes below 2,100 again Tuesday, "that's several times we broke 2,100 and couldn't make it through on a sustained basis and that's giving a sense of a major top," said the chief investment strategist for Wells Capital Management, which manages more than $350 billion in assets.

The index fell 1 percent to 2,104 on Tuesday.

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Jim Paulsen, Wells Capital Management's chief investment strategist
Adam Jeffery | CNBC
Jim Paulsen, Wells Capital Management's chief investment strategist

Economic reports have also gotten better, including housing numbers, capital goods spending and ISM reports, Paulsen noted.

"It now looks like the spring thaw is happening in the United States and if the U.S. economy is bouncing, we're going to move up that Fed exit window again."

While the market is anxious over the timing of Federal Reserve interest rate hikes, Paulsen pointed out that the central bank usually tightens much sooner in the cycle.

"So here they are going to tighten, but it's with us at nearing full employment and maximal profit margins," he said. "If the economy goes up, we're going to aggravate full employment pressures and if the economy stays weak, you can't expand margins so the earnings go punk."

Paulsen believes the only way out of the situation is to refresh the values, refresh sentiment and get rates reset.

"That's probably going to be a correction yet before we get to a level where we can sustain another buy and hold run."

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—CNBC's Stefanie Kratter contributed to that report.