Don't worry, S&P rally is still intact: Technician

Stocks on Friday closed out their worst week since August, with major U.S. indices falling about 4 percent. However, one noted technical analyst said investors have little reason to be concerned.

Looking at the charts, Craig Johnson of Piper Jaffray said the recent sell-off is due to short-term profit-taking as investors cash out on the impressive October rally.

"What we're seeing is kind of a rotation, every sector is getting some profit-taking coming into play," Johnson said Friday on CNBC's "Power Lunch." "A month or two ago, it was the health-care sector; now it's starting to find it's footing. Now it's the consumer cyclical sector."

Despite concerns about consumer demand, energy prices and materials, Johnson said the primary trend for the S&P 500 is still up.

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"We've certainly lost momentum over the last week or so, and from our perspective not too surprising, given the October that we have seen," Johnson said. "So we're going to get a little bit of backing and filling here. Let's put this in the context that the bigger, longer-term, secular bull market is still intact."


Johnson said for the S&P to break its uptrend, the index would have to close below the 1,800 level, an 11 percent drop from where the S&P closed on Friday at 2,023.

Shorter term, Johnson said he sees support coming in around 2,020 and again at 2,000.

"We've got maybe another 1 percent downside before the market will try to rally," he said Friday.

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Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

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