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Scared yet? More pain for markets ahead

Strong November-December rally: Pro

Stocks shook off steep losses, as small caps and transports moved higher Thursday, but strategists say the selloff will likely continue until investor psychology changes and they feel more pain.

"I think there's potentially more downside. My target on the S&P is around 1,800, the Nasdaq is around 4,000 and the Dow is 15,400, " said Paul LaRosa, technical strategist at Maxim Group.

LaRosa said the market signaled a pending selloff when the small-cap Russell 2000 failed to confirm the September highs made by the Dow and S&P 500, and instead moved lower. The Russell bounced slightly Thursday, as it did late in Wednesday's session, and is now off about 11 percent from its July 1 high.

Stocks opened sharply lower Thursday, with the Nasdaq entering correction territory with a 10 percent decline from its highs. The Dow reversed much of its steep losses, and the S&P turned positive briefly. The Russell 2000 was trading higher, with a gain of 0.7 percent.