Market check: Will S&P 500 selloff steepen?
Chart analysts believe the recent breakdown in the S & P 500 has placed the index in a danger zone with potentially bigger losses on the way. Since reaching a recent high of 2,130 in June, the large-cap S & P index is down 3 percent on growing concerns over the unresolved debt crisis in Greece. "For weeks, we've been keying on 2,074 on the SP500 E-mini as the first level where real technical damage would occur," said Frank Longman, managing director at Brean Capital. The S & P 500 E-mini refers to the stock market index futures contract traded on the Chicago Mercantile Exchange's Globex electronic trading platform. Last week, the benchmark fell below the 2,074 level, leading the technician to set the next key area to watch at around 1,996, implying another 3 percent drop from here. "If that trend line fails that, there's nothing but air for about 10 percent so the stakes are very high," he added. Source: FactSet and Brean Capital As shown on the chart above, the S & P 500 is currently testing its 200-day moving for the first time since October. The combination of rising volatility and negative breadth are also reasons for Longman to recommend clients seek "protection" under 1,990 and "not be afraid to take profits on extended winners and decisively cull laggards from the pad." According to John Kosar, director of research at Asbury Research, other reasons that could put a lid on the market include contracting ETF asset flows, overhead resistance in the Nasdaq composite and Japanese Nikkei indexes, and a bearish chart pattern in technology bellwether Cisco Systems . "A deeper decline may be necessary to put a sustainable bottom into place," predicted Kosar in a note to clients Monday. Similarly, Ari Wald, head of technical analysis at Oppenheimer & Co., believes the greater dispersion in performance underneath the S & P constituents this year should lead investors to remain selective. In the past 12 months, for example, the spread between the best-performing sector (health care, plus 24 percent) and the worst (energy, minus 24 percent) is the widest it's been since February 2010, based on Wald's research. "We specifically think that weakness in commodity and interest rate sensitive sectors should remain areas of weakness in the S & P 500 over the coming months and create a choppy trading environment," added the technician. For levels, he says 2,040 is a key support level for the S & P 500, followed by 1,970. Among Wald's top sell ideas, Freeport-McMoran , FirstEnergy and Coca-Cola , all make the list.

Traders work on the floor of the New York Stock Exchange. Getty Images