The chart that says the S&P 500 isn’t done rallying this year

Stocks continue to have serious upside, according to technical analyst Craig Johnson of Piper Jaffray.

The S&P 500 has already risen 9.1 percent this year. And the Dow Jones industrial average, which is up nearly as much, closed Wednesday at a record level. Stocks got a midweek boost thanks to congressional testimony from Federal Reserve Chair Janet Yellen that pointed to easier money policies than many had anticipated.

But Johnson remains an optimist, maintaining that the best is still ahead for the market.

"I hear so many people say that this is a market that is expensive and that we need to have some sort of price correction," Johnson said Wednesday on CNBC "Power Lunch." "Well you can have a correction one of two ways: Price or time. ... Since the election, we've had two time corrections."

In other words, the market has already "corrected" its prior excesses merely by staying flat for periods of time, in the technical analyst's view.

Following those "time corrections," the S&P 500 has "now broken out above of that last time correction in new highs and I think that we are setting ourselves up for further highs from here," Johnson said.

"The market has bought itself its time," he added. "So [there is] more upside to come, and we still remain bullish and optimistic."

After the S&P hit his 2,424 price target at the beginning of June, Johnson raised his 2017 year-end forecast to 2,575. That means he sees upside of 5.4 percent between now and the end of the year, which is roughly in line with the pace of the market's gains thus far in 2017.

On the other hand, Boris Schlossberg of BK Asset Management sees a traditional "price correction" as reasonably likely.

"Everybody is so complacent and so completely confident that we're doing nothing but going up," Schlossberg said Wednesday on "Power Lunch."

In order to protect against a potential drop, he advocates buying bearish put options, which will increase in value should stocks drop.

Since options prices are relatively low right now, making such a bearish bet in order to mitigate the risks of holding onto stocks makes for "a very intelligent insurance policy," Schlossberg argued.


Trades to Watch

Trader Bios


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

Read more