Stocks have crossed an important threshold: Technician

After seeing the worst start to a year since 2009, stocks are starting to turn around. The S&P 500 rose more than 2 percent in the first week of March, and some investors are betting on a move back into the green by the month's end.

"From what we see on our desk, there are people investing now, looking for the S&P to go positive by the end of the first quarter," Nicholas Colas of Convergex said Friday on CNBC's "Trading Nation."

The market strategist said stocks have gone from being very oversold to modestly overbought in the recent rally. Nonetheless, Colas sees more room to run, given strength across many S&P sectors.

"This has been one of the most hated rallies I think I've seen in my career, because things looked so bad just a couple weeks ago," he said. "You've had a big rotation out of that pessimism about global growth to thinking, maybe the U.S. economy is going to be OK this year and the rest of the world isn't going to fall off the edge."

According to technician Craig Johnson of Piper Jaffray, the S&P's break above 1,950 was a move past its "pain trade threshold," and a sign that stocks will go even higher.

"If we stayed below that, it was more painful for people to be long," he said Friday on "Trading Nation." "But now that we're above 1,950, the pain trade is up and I don't think investors have enough capital to put back to work at this point in time."

Read MoreThe S&P is closing in on a critical level

Johnson said market breadth is also pointing to more gains ahead, and has a target of 2,350 for the S&P 500. On Friday, the index closed just below 2,000.

"Back in February, we reached levels in terms of market breadth that we've only seen 20 times previously," he said. Measuring market gains after those times, Johnson said stocks often saw double-digit returns over the next year. "We think the market has gotten washed out."

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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.

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.

Follow Michael Santoli on Twitter @michaelsantoli

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