This chart shows that the market may be close to a major top

The S&P 500 has enjoyed a sizable rally this year, but one chart-minded trader sees a clear-cut top in store.

The market has realized a new level of support at 2,400 and a longer-term top is ahead at the 2,500 market, according to founder Todd Gordon.

Specifically, a channel of technical resistance that began forming in July between 2,000 and 2,450 projects higher to his top target.

"We see a pending top in the market in the next three to six months, and at that point the fundamentals will confirm [the market's price action] as the Fed begins to wind down the size of the balance sheet, drain some liquidity from the system, and that's what will eventually confirm what the price action has already told us," Gordon said Wednesday on CNBC's "Trading Nation."

The "path of least resistance" is up at this point in the market, said Mark Tepper of Strategic Wealth Partners. He believes stocks are less expensive relative to some competing assets like corporate bonds and Treasurys, and is rather comfortable with the market's direction.

"We're definitely seeing a recovery in top-line growth, which is being driven by pricing power gains. Investors are very confident because the global growth story is real. And furthermore, you see this recent softening in inflation, which is causing many people to believe the Fed could now proceed even more slowly" in raising interest rates, which could cause equities to rally, Tepper said.

He would become more defensive in his positions if he were to see more aggressive tightening from the Fed, or if profits were to come under pressure. But he still forecasts earnings will continue to accelerate into the beginning of next year.

At that point, Tepper said, stocks will begin to cool off, and if growth decelerates midway through next year and margins narrow, we might see a bear market.

"But we are at least a year away from that," Tepper said.


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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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