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

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Trading Nation: Determine the downside

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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