The S&P 500 has fallen as much as 2 percent, from Friday’s close to Tuesday morning’s low. And while stocks bounced back later in the session, technician Louise Yamada believes that more selling is ahead.
“I think we’re due for some kind of a pullback,” Yamada, of Louise Yamada Technical Research Advisors, said Tuesday on CNBC’s “Futures Now.” “And the fact that the Dow is tickling 18,000 is always a hesitation, the S&P close to 2,100—you [would expect to] get some kind of a pullback.”
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Additionally, enthusiastic market sentiment could point to weakness as well, given that market sentiment is often viewed as a contrary indicator.
“The sentiment has been quite bullish, and would suggest a pullback the way we had in January, and the way we had in August, and the way we had in October.”
So just how far might stocks fall?
“I think the first level to watch is probably the 1,950 level, where the 200-day moving average comes in. That’s a 6 percent pullback, the way we’ve had in the other pullback periods. So it would be a normal, probably refreshing activity to have come down.”
In fact, it’s not until the S&P falls below 1,900, which Yamada calls “critical support,” that she would get nervous.
“If we start coming under 1,900, 1,880, you’ll be breaking the 2012 uptrend, and you will be breaking the support level from the closing area of the October decline,” she said. “That would imply a lower low, which would imply more supply than we’ve seen in these other pullbacks,”