A correction is definitely in progress as confirmed by most indicators including the NYSE Percent Stocks Above The 50ma indicator as it has broken below its previous swing low in the neutral zone. Stock markets are most likely in wave [c] down to complete either a 2nd or 4th wave correction depending on the degree of trend. Most now believe it to be a 4th wave correction, but we should keep an open mind.
The market is becoming oversold rather quickly but there is still plenty of room for downside in the indicators such as RSI 14, Williams %R 30, and the McClellan Oscillator. For the SP500, wave [c] = wave [a] around 1273 which is only 22 points lower than yesterday's close. Wave [c] = 1.618*wave[a] at 1243 where there is confluence with a lower channel line. There is also minor support at the March 17, 2008 low of 1257. These levels could easily be achieved in 1 to 3 trading days, so traders holding bearish positions should be vigilant in looking for signs of reversal. In this type of market gains in short or put positions could evaporate rapidly as volatility falls sharply on a reversal.
The minimum upside target for the SP500 once this correction is over is the recent high of 1344, but more likely targets are 1431 to 1461 with a possible gain on the order of 15% by late May. At that point many will consider the rally to be complete, but more upside potential exists after a 4 week +/- summer correction. Only if there are significant changes in market character this summer would a bear market be considered.