The S&P still has further to fall: Technician

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.

Read MoreSomething pretty strange happened in the market

"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."

Want to be a part of the Trading Nation? If you'd like to call in to our live Wednesday show, email your name, number and a question to


Trades to Watch

Trader Bios


Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

Read more