The Santa Claus rally that appeared to be developing during the last few sessions of 2015 vanished almost overnight and, so far, 2016 is not looking good. The benchmark S&P 500 index has now broken its significant support level at 1,980, which I believe will lead to further selling pressure.

My indicators are bearish this week, a downgrade from last week’s bullish readings — but, surprisingly, they are not as bearish as I thought they’d be. However, I don’t believe we’ve seen the last of the selling yet, so my indicators could fall even deeper into bearish territory.

Usually we would see a manifestation of what is known as the “January effect,” which occurs when prices rebound in January after the tax-loss selling from December is over, but this is an unusual year. The Dow Jones has dropped more than 1,000 points since New Year’s Eve, and it looks like January will be a down month. This is not a good sign, as January’s action predicts the outcome for the rest of the year about 75% of the time.

I believe that the U.S. economy could be heading toward recession, and I expect the indices to continue to falling even further before recession is officially upon us.

This is the opposite of what the Federal Reserve telegraphed to the market as it tried to justify its hike of short-term interest rates. Once again, the Fed was wrong. U.S. central bankers do not have a good track record of predicting the future and, in fact, they have over-estimated economic growth in each of the last four years.

While the Federal Open Market Committee (FOMC) implied that the market could expect four additional hikes in 2016, I now think that it is finished increasing rates and that it will revert to its zero interest-rate policy (ZIRP). With that in mind, yield-starved investors will likely move into dividend-generating instruments, so that area of the market could see some appreciation as a result.

Scanning the oil patch, I mentioned last week that I thought WTI crude oil would continue to decline, and it has fallen to 12-year lows this week. The problem remains that there are too many oil-producing countries in financial strife, and they will have to keep producing just to keep themselves afloat.

To sum it up, I am not at all surprised by the bearish action we’ve seen this past week, as I have been projecting recession for a while now. We have seen a lot of disappointing data points recently, particularly out of the real estate sector.

However, the market’s latest sharp decline did occur earlier than I thought it would after the Santa Claus rally dissipated essentially overnight. While we are not officially in a bear market, many individual stocks are already down 20% from their highs, so it’s certainly felt like a bear market for the last few months.

In this environment, I’m recommending a bearish play on a materials (specifically, chemicals) stock: Olin Corporation (OLN).

Buy the OLN May 20th $15 Put options at $1.10 or lower. After entry, take profits if the stock price hits $14.60 or the option price hits $1.80. Exit if the stock price closes above $17.30.

Note: This is a relatively thinly-traded option chain, so you may need to be patient to get established at my recommended entry. Avoid buying a large number of contracts at once to prevent wild price swings; instead, enter your orders in smaller lots of five or 10 contracts.

If after three days you still have not gotten the position filled, cancel the order, as the profit probabilities may no longer be valid.

Additionally, if an option or its underlying stock does not hit its target, or if the stock does not close at or below its sell signal price within three weeks of entry, close the position. I do not recommend holding an option play for more than three weeks.

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