"Stocks are likely in a new downtrend," says Michael Ashbaugh. In Marketwatch's TheTechnical Indicator, he looks at the S&P's prospects and some drug stocks set to buck the trend.

"The S&P 500 has violated its major moving averages in the closely tracked 900 area. The recent downturn was convincingly bearish, placing the burden on market bulls to reassert the uptrend.

"After finding resistance in the 923 area, the S&P sold off sharply, edging back under its 200-day moving average, which currently holds at 900 and now marks resistance. This is bearish price action.

"Consider the following:

1. Most obviously, the S&P violated its major moving averages. Its 200-day currently holds at 900, while its 50-day rests at 899. The index itself recently closed just under both levels. 
2. The market's breadth registered bearish extremes. Specifically, last Monday, down volume surpassed up volume by 14 to 1 on the NYSE, and by 8 to 1 on the Nasdaq. 
3. The U.S. markets have suffered two 14-to-1 down days across a narrow six-session span, the earmarks of a significant trendshift. 

"So when the S&P violates its 200-day moving average driven by 14-to-1 market breadth, a flag has been raised to a trend reversal. Further, the VIX failed to surpass last week's high. This means investors remain surprisingly complacent, increasing the risk of further market losses.

"So looking ahead, the best hope for market bulls is that the S&P reverses sharply back atop the 900 mark driven by at least 9-to-1 market breadth. Such a move would place the technical backdrop on firmer, if not outright bullish, footing.

"Yet barring this sharp reversal, the U.S. markets' path of least resistance is now lower pending a break back atop the S&P's 200-day moving average.

"Nevertheless, we continue to find names that are well positioned technically. These are intended as radar screen names - sectors or stocks positioned to move near term.

"With the broad markets turning lower, the Pharmaceutical Index has come to life. Specifically, the group's cleared its breakdown point around the January trough, breaking to four-month highs. 

"At the same time, it's edged atop its 200-day moving average, exhibiting relative strength vs. most other sectors. Among the related names positioned to rise: GlaxoSmithKline (NYSE: GSK) , Teva Pharmaceutical (NASDAQ: TEVA) and Abbott Laboratories (NYSE: ABT)."