Look out—Technicians see more selling
The S&P 500 broke below an important trend line Monday, and technicians see more selling ahead.
"I'm not willing to say this is a bear market at all. I just think you're going to have a very severe, very sustainable and really quite ugly correction that will probably make a lot of people wail and gnash their teeth before it's done," said Dennis Gartman, publisher of the Gartman Letter. Gartman said on "Fast Money" that he is neutral on stocks, after getting concerned about the market a week ago, and he sees a total 15 percent correction for the S&P 500.
The S&P 500 is down 5.7 percent since the start of the year, and it fell 2.3 percent Monday. The S&P ended the day at 1741, and selling accelerated when it broke through 1770, a level it tested and held last week.
"We just broke the intermediate trend line. If you don't reclaim that within a session or two, you typically stay in that direction," said Scott Redler of T3Live.com. The S&P fell through its 100-day moving average, 1770, and then fell below another level traders were watching – the November low of 1746.
Redler said the next line of defense is the 150-day moving average, 1736, and after that, the 200-day moving average at 1707. "It does feel like we should hit around the 200-day," he said. When the 1770 level broke, "it was a clue to traders to reduce risk and even for some bears to add to shorts."
Paul LaRosa, chief technician at Maxim Group, said he was watching key support levels that were broken Monday: 1767 on the S&P and 1099 on the Russell 2000. The Russell fell 3.2 percent to 1094, but the Nasdaq held support of 3979, regaining some ground and closing at 3996.
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If those indexes confirm a move in the Dow, which broke support, LaRosa said there could be a further decline of four to five percent.
"I think this is going to be a buying opportunity. I don't see this as a 2007-style correction. I don't think it's going to be major in scope. I think there will be buying opportunities. It's not just across the board. Money is rotating into different sectors," he said, noting there's been buying interest in gold miners and commodities-related stocks.
Jeff Kleintop, chief market strategist at LPL Financial, said in a note that he does not expect the sell off to turn into a bear market or even a major correction. But he made an interesting point on the surge in stock exchange and off exchange trading volume, which he said was double the average trend of recent months in January and the highest level since May, 2010.
"When it comes to volume, be careful what you wish for. A common criticism of the bull market in recent years is that buyers do not have a lot of conviction because volume has not been strong. The implication has been if volume does not pick up, the market may decline. However, the past few years show the opposite: that markets climb on relatively quiet trading for long stretches of time and then briefly pull back as volume jumps," he wrote.
The fast decline in stocks has also led to lots of chatter about whether the market would decline 10 percent, widely viewed as "correction" territory, or even signal the onset of a bear market. The market has not fallen more than 10 percent since 2011, though it fell 9.8 percent in 2012. It is viewed as a bear market when the market falls 20 percent.
While 10 percent is often referred to as correction territory, Art Cashin, director of floor operations at UBS, said he does not think it necessarily designates a correction. "Over the years, I don't think that was anything I was taught," he said. "What is wrong with saying the market has a 7 percent correction. A correction is a pullback that is not converted to a bear market."
Paul Hickey, co-founder of Bespoke, agrees that the 10 percent number is a bit arbitrary. "You look at the numbers. When you have a 10 percent correction, the average decline is 15 or 16 percent," he said.
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Jeff Hirsch, publisher of Stock Traders's Almanac, also says it's not that simple.
"20 percent is pretty much the unwritten rule, which is fair enough. Anywhere in the 15 to 20 percent is bear market territory but a correction can be 1 or 5 percent," he said. "10 percent is where people get itchy."
"If we are down somewhere around 20 percent at any juncture you'd have to consider seriously it was a bear market, unless it was a flash crash kind of thing and it was intraday," he added.
Bear markets could also be short lived. "We had a 45-day bear market in 1998," he said.
Hirsch said Ned Davis Research defines bear markets very specifically:
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According to the Stock Trader's Alamanc, Ned Davis view is that: "A bear market requires a 30 percent drop in the Dow Jones Industrial Average after 50 calendar days or 13 percent decline after 145 calendar days. Reversals of 30 percent in the Value Line Geometric Index since 1965 also qualify."
—By CNBC's Patti Domm. Follow her on Twitter @pattidomm.