×

Don't worry—this is just a 'back-to-school' sale: Technician

Stocks suffered a terrible Friday, with the S&P 500 falling 2.5 percent and closing at its lowest level of the day to log its worst session since June. But one market technician says there's little reason to worry just yet.

"In our world, a 0 to 5 percent drop is noise, 5 to 10 percent is a pullback, 10 to 20 percent is a correction and 20 percent or more is a bear market," Piper Jaffray technical research analyst Craig Johnson said Friday on CNBC's "Power Lunch."

With the S&P just 3 percent off its all-time high, Johnson's point is that we remain in the "noise" phase.

"Right now, this looks like a back-to-school sale from our perspective," Johnson said.

The sell-off appeared to be driven by indications that a Federal Reserve rate hike in September is a real possibility. This after a long lack of market movement, and amid building concerns about high valuations and a soft economy.

Yet Johnson sees reasons for stocks to swiftly sail higher once again.

"I know a lot of fund managers are going to be looking to put money back to work," he said. "This is going to give them the opportunity and the reason to do that."

The technical research analyst maintains a year-end target of 2,350, which is more than 10 percent above Friday's closing price.

Meanwhile, Zachary Karabell, head of global strategy at Envestnet, finds the market's Fed-inspired drop mighty revealing.

"Nervousness about 'Does the Fed move 25 basis points in a week or two versus in two months' speaks more to this ongoing uncertain delicate market psychology than it does to any substantial fundamental shift," he said Friday on "Power Lunch."


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.

Sara Eisen

Sara Eisen joined CNBC in December 2013 as a correspondent, focusing on the global consumer. She is co-anchor of the 10AM ET hour of CNBC's "Squawk on the Street" (M-F, 9AM-11AM ET), broadcast from Post 9 at the New York Stock Exchange.

In March 2018, Eisen was named co-anchor of CNBC's "Power Lunch" (M-F, 1PM-3PM ET), which broadcasts from CNBC Global Headquarters in Englewood Cliffs, N.J.

Read more

Connect