S&P Headed Straight for 1,250: Strategist

We are in a cyclical recovery that has further upside potential, Shane Oliver, head of investment strategy at AMP Capital Investors, said Friday. He said the S&P 500 index is heading towards the 1,200 to 1,250 level.

"The markets have been able to break out to new highs for the year; the volumes have been reasonable; the number of stocks participating in the rally that we've seen over the last couple of weeks has been very high, in other words the breadth has been good, all is well," he told CNBC.

The U.S. market is on its way up after breaking the neckline on the head-and-shoulders pattern — a chart pattern where a reversal sees spikes higher, he said.

The Dow, the S&P 500, and the Nasdaq all reached fresh 2009 closing highs Thursday, and are at their highest since November (Dow and S&P 500) or October (Nasdaq).

"There's a lot of upside to go," Oliver predicted. "Yes, there's going to be setbacks along the way, but I think the broader trend will be up."

"Fundamentally, I think the good news about this rally, which is different to the rallies we saw through last year, is that it has been backed up by a bit of economic data," he said.

Existing home sales were up for the third month in a row in June, signaling a stabilization in the US housing market, he noted.

"So far, 74 percent of the (U.S. earnings) results have come in better than expected," he said.

He added he likes stocks, commodity currencies, investment grade corporate bonds over the next 6 to 12 months.