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Chart Pro Says To Expect 15% More Downside

Major stock indices are trading near two-year lows, but the downside case for another 15% decline can be made, according to Piper Sandler chief market technician Craig Johnson.

Benzinga · 03/17/2020 13:31

Major stock indices are trading near two-year lows, but the downside case for another 15% decline can be made, according to Piper Sandler chief market technician Craig Johnson.

Russell 'Foot Soldiers,' S&P 'Generals'

The Russell 2000 index represents the "foot soldiers" of the market, and 75% of the stocks in the index closed below their December 2018 lows Monday, Johnson said on a CNBC "Trading Nation" segment.

Only half of the S&P 500 index components are trading below their 2018 lows.

The "foot soldiers" are always the ones that "sell off first" and the more powerful "generals" in the S&P index "get hit last," he said. The "generals" could see another 10% to 15% fall from here, Johnson said. 

Tatro: Young Investors Should Still Contribute 

Young investors looking toward the very-long term shouldn't do anything differently, Johnson said.

It is equally as important to continue contributing to retirement funds, even during the current volatility, Joule Financial CIO Quint Tatro also said on "Trading Nation."

What's Next

The fearful environment is "strong," but it could translate to "even further panic," Tatro said. Investors should adapt their investment strategy based on their time horizon and work under the assumption it "takes a very long time" for the markets to come back, he said. 

If this is the case, investors closer to retirement should consider exposure to sufficient fixed income "to give them a few years" of breathing room, the CIO said. 

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