Technical analysts see warning signs that the much anticipated correction may be on its way, possibly in September.
JPMorgan's Jason Hunter said the market could see a sell-off of as much as 8 percent in the S&P 500 as soon as next month. That would be the biggest drop since the double-digit decline that ended in February 2016.
"That is the weakest month. If you actually look at statistics, October is bad, but it's only the first two weeks. The entirety of September is usually bad for the equity market," said Hunter, who is head of fixed income and equities technical analysis.
Hunter said if the S&P 500 breaks below 2,400, that would be a sign to him that more selling is coming, and a correction could take the market down to 2,300. The S&P 500 closed at 2,428 Monday afternoon, a gain of nearly 3 points. He said 2,300 could be a quick, temporary bottom and bring in buyers.
"We've already suggested people should unwind risks. It's time to reduce those positions now," said Hunter. "If you want to be cute about timing it, all you have to do is look back at August 2015." He said the market saw a big unwind within three days.
Hunter doesn't expect a big move lower before Labor Day, but he says it could happen. "If the pieces are in place for a correction, you don't want to wait until Labor Day to see it, because surprises can happen." If equities go, he said Treasury yields, which move opposite to price, could follow and could temporarily touch a low near 1.90 percent before coming back.
Part of the market that was showing real weakness was the Russell 2000, now barely negative for the year after sliding just a fraction of a point Monday. The Russell ended Monday at 1,356.92, off less than a point, or 0.07 percent, for a year-to-date decline of 0.02 percent.
"The small-cap indices have been weak, and they're the weakest of the group, and then I would put the S&P as showing some warning signs now," said Paul LaRosa, Maxim Group chief market technician. "The breadth has not been great. Even when it was going up it wasn't healthy, in my opinion. The number of new highs wasn't that high."
LaRosa said he's watching a support level just above 2,400. "2,403 is the key level on the S&P that I would not want to see it close below. That would be a negative sign," he said. After that the market could find support at 2,325 if it kept moving lower.
"It looks pretty wobbly. It looks like this time could be real, more than the others," said LaRosa. "Historically, the fall is a time of weakness. That's when a lot of major moves happen to the downside."
Last week, the market had its biggest sell-off since May, and it saw back-to-back weekly losses for the first time this summer. The S&P is down 1.7 for the month to date, which would be its worst decline since last October.
"If you look at what's sold off with these miniature flight-to-quality moves, it's the things that haven't worked well. Small-caps, energy," Hunter said. "People are still trying to hold on to the things that have performed well, like the big momentum trades."
He said any number of things could be a catalyst, including escalation of tensions with North Korea, or signs that there will not be tax reform or if Congress heads toward a showdown over the debt ceiling.
"The rising tide is not lifting all the boats. You have some boats on top," like momentum names, said LaRosa. "A lot of other boats have been sinking."
There are few catalysts for stocks Tuesday, and technicals sometimes become more important in a dearth of market news. Traders are awaiting headlines from the Jackson Hole, Wyoming, Fed symposium Friday, where both Fed Chair Janet Yellen and European Central Bank President Mario Draghi speak.