US Markets

S&P could drop to 1,800: Technician

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The charts show more downside for the market ahead, with the S&P 500 possibly dropping to 1,800, technician Dan Fitzpatrick said Friday.

"Bottoms don't start at the top. We had a multiyear uptrend. It's been consolidating for most of the year. That's broken if you look at the S&P," the technical analyst for StockMarketMentor.com said in an interview with CNBC's "Closing Bell."

"The way the market's trading today, I'm kind of looking at the next leg down as being 1,800."

That said, he's not expecting a big crash, but just doesn't see the upside from here.

"Why would somebody come in and buy? I just don't see it. I'm not generally a bear but I'm objective, and that's what I see."

A trader works on the floor of the New York Stock Exchange.
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U.S. stocks plunged Friday, with the Dow Jones industrial average and closing down more than 1.5 percent.

The Dow closed in correction territory, or more than 10 percent off its 52-week high. The S&P 500 and Nasdaq composite are about 8 percent below their 52-week highs.

O'Neil Securities' Kenny Polcari said the market was disappointed by the Federal Reserves' decision to not raise interest rates Thursday.

"I think the market has already suggested that they missed their opportunity two, three, four times earlier in the year and now they built it up, built it up, built it up that it was going to happen in September and then boom—all of a sudden now we're being held hostage by emerging markets," he said.

While the Fed's move will breed more market volatility, there could be opportunities for savvy investors, said Mark Luschini, chief investment strategist for Janney Montgomery Scott.

"We want to use this opportunity to wade into higher-quality, higher-yielding names" in areas such as consumer discretionary, consumer staples and health care, he noted.

Specifically, he likes stocks such as McDonald's, Wal-Mart and Pfizer, which all have yields above 3 percent.


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StockMarketMentor.com's Fitzpatrick would look at stocks that are working and that haven't been impacted by the volatility in the market.

"Look at the news flow. If we have bad news and a stock goes up, imagine what's going to happen when we have good news. So look at these strong stocks and when the market does stabilize, and it will, then those are the stocks that you want to be in," he said.

He likes Amazon, Paycom Software and Fitbit.

However, Fitzpatrick would stay away from energy and foreign markets.

Luschini, on the other hand, likes Europe and Japan.

—CNBC's Evelyn Cheng and Ritika Shah contributed to this report.

Disclosure: Janney Mongomery Scott clients own MCD, WMT, PFE. Fitzpatrick is long AMZN, PAYC, FIT

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