Stocks kicked off the year with a steep drop on Monday, extending losses slightly on Tuesday morning. And according to one technician, the problems for the S&P 500 are just beginning.
Ari Wald, head of technical analysis at Oppenheimer, said the index is heading even lower to the 1,900 level, another 6 percent drop from where stocks opened Tuesday.
"I don't think the correction has fully run its course here. I think the response to the China data was magnified because there was a very weak technical setup going into it," Wald said Monday on CNBC's "Power Lunch."
Most concerning to Wald are a broken four-year uptrend, higher trading volume on down days and a lack of participation from all stocks in market rallies. And while large-cap tech names such as Neftlix and Amazon saw a severe plummet on the first trading day of the year, Wald said these are the stocks investors should stick with.
"This is healthy consolidation. Those are the names you want to buy on that correction, they continue to lead the way looking out the rest of the year," Wald said.
From a fundamental perspective, Boris Schlossberg of BK Asset Management sees additional headwinds from China concerns, geopolitical risks, slowing corporate profits and a strong U.S. dollar. As the S&P 500 will have a hard time holding on to gains this year, Schlossberg said, investors should stick with defensive and consumer stocks.
"The consumer itself is going to do well as wages begin to increase and there's going to be a little bit more of a spend. But other sectors are going to be in much bigger trouble," Schlossberg said. "I'm just not a big lover of the S&P as a broad buy this year."