×

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.

Read More Pay attention to inflation risk in 2016: Credit Suisse

"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.

Want to be a part of the Trading Nation? If you'd like to call in to our live Wednesday show, email your name, number and a question to TradingNation@cnbc.com.

Videos

Trades to Watch

Trader Bios

About

Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Brian Sullivan

Brian Sullivan is co-anchor of CNBC's "Power Lunch" (M-F,1PM-3PM ET), one of the network's longest running programs, as well as the host of the daily investing program "Trading Nation." He is also a frequent guest on MSNBC's "Morning Joe" and other NBC properties.

Read more

Connect