“As the market comes undone, you do have leadership that holds on for a period,” Paulsen said. “But then there’s a slingshot effect and ultimately, these name have to catch up.”

Biotechnology’s plunge has “unnerved people,” but because the stocks have led the decline following August’s slump, they could lead the next rally, said Bruce McCain, chief investment strategist at Key Private Bank in Cleveland, the private-banking unit of KeyCorp that oversees more than $25 billion in assets. “It’s fairly typical for some of the best stocks to pull back pretty dramatically.”

Amid a broader flight to safety, what remains to be seen is how this plays out as the market finds its footing, McCain said. “The question is: Are we rolling toward a major bear market or is this simply a corrective action?”

While McCain’s in the latter camp, there could be further pain ahead as more groups test their August lows. “We don’t like to see the deterioration in the market, but you have to realize it’s a natural part of the process,” he said.

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