Top technical analyst on investing using charts, chances for a year-end rally

Published Thu, Oct 13 201612:42 PM EDTUpdated Thu, Oct 13 201612:51 PM EDT

Stephen Suttmeier, a top-ranked technical analyst who's chief equity technical strategist at Bank of America Merrill Lynch, sat down CNBC's Mike Santoli for an educational interview on how investors can employ technical analysis to their advantage, his favorite sectors for the months ahead and trading based on seasonal patterns. "Bullish seasonality starting in November suggests that we should find some firm footing," said Suttmeier during the interview. "It wouldn't surprise me to see the market work its way up to that 2,225 [level] and over time, 2,300 is potentially possible." The 2,300 projection from the technical strategist for the S & P 500 represents a move of 7.5 percent from Wednesday's close. In this two-part conversation, Suttmeier first lays out his investment approach and then uses charts to build his case. The technician also discusses: His long-term outlook for the S & P 500. How to play rising rates. The key technical indicators every investor uses. PRO subscribers can also read the entire transcript of the exclusive interview below. (Editor's note: The content below is from a third-party service and there may be some minor transcription errors. Watch the video for the exact quotes.) MIKE SANTOLI: Stephen Suttmeier is the chief equity technical strategist at Bank of America Merrill Lynch, whether he sets the investing tone for private and institutional clients around the globe. Stephen was the fourth runner-up in the 2015 Institutional Investor All-America research team and a finalist in the Technical Analyst Awards for Best Bank Equity Technology Research in 2015. He joined Merrill Lynch in March, 2007, as a technical research analyst. Previously, he was a senior FIC (?) analyst, technical analyst at Informa Global Markets. He's a CFA charter holder and chartered market technician, and a member of the American Association of Professional Technical Analysts, and the Market Technician's Association. And he joins us now here at the NASDAQ to talk about his market outlook and technical analysis in general. Steve, thank you very much. STEPHEN SUTTMEIER: Yep. Thanks for having me. MIKE SANTOLI: So let's I guess start a big picture way. As you first got involved in technical analysis, as you've kind of studied it, you've had these kind of certifications and made a discipline out of it, what is your main objective when you're actually trying to fashion a technical market outlook? What are the clues that you're deriving about the making outlook from these charts? STEPHEN SUTTMEIER: Great question. What we're really looking to do is establish risk/reward levels first. Whether the market's at a support or resistance. And if we're at a support, we're more inclined to buy; if we're at a resistance, we're more inclined to take risk off the table for that particular asset class. But what's also more important from a longer term investigation perspective is the trend. And we wanna be trading or investing in the direction of longer term trend. We also, when going with sectors and asset classes, and even individual equities, we also wanna look at what the trend is relative to your benchmark. And going across the world, talking to investors, the benchmarks have changed over time. A lot of people used to be more S & P benchmarks; now ACWI's comin' up in the conversation a lot more. Investors have definitely gotten more global. MIKE SANTOLI: That's the All Country World Index. STEPHEN SUTTMEIER: Exactly. Correct. All Country World Index. MIKE SANTOLI: So essentially, people are looking for the trend or the chart work that says is this asset class becoming more in favor relative to world markets, or less in favor? Or kind of has the potential to continue to outperform or not, right-- STEPHEN SUTTMEIER: Exactly. The bottom line is: I mean, you can find a really good absolute price chart. Has all the bullish bells and whistles. And head-and-shoulders bottom that counts up 20 percent. But what if the market has a similar pattern that counts up 35 percent? You'd rather own another sector that has a projection that's higher than 35%. And that's what the relative chart gives you. On the other hand, it tells you what to avoid. If you have an up-trending market and you wanna outperform, you wanna avoid those sectors that have the weaker relative trends. And you can see that a lot develop over time. Over the last several years, financials have had that problem. Maybe they're turning here a little bit on a relative basis. But generally speaking, the relative trend has been very bullish on tech, in particular. And that remains the case today. MIKE SANTOLI: It's funny, 'cause I wonder if you get a lot of this push back and say, "Well, that just sounds like all you're really looking to do is ride whatever momentum is working right now," as opposed to what some other kinds of investors might say, "Ah, I'd rather kind of buy what's out of favor, or try to play for a reversal of a trend." STEPHEN SUTTMEIER: Yeah, we can do that as well in technicals. There's patterns called bottoming patterns like the head-and-shoulders bottom where basically, when you think about that, what you're really talking about is supply and demand. Basic Economics 101. So a head-and-shoulders bottom shows supply in a market getting exhausted, and you go to lower lows. And all of a sudden, you tick up, go to a higher low. That means investors are starting to demand whatever that stock is, asset class is, and you break through the neckline in the pattern, or resistance, which is an area of supply that has capped the stock in the past. And that suggests that demand has overcome supply and a reversal is at hand. There's also other patterns called big bases or bottoms, and those can be 10,12,15-year patterns. Technology broke out of that in 2012 on a relative basis. It continues to break out of these big, 15-year basis now versus the S & P. So it's very interesting how that sector is set up here. MIKE SANTOLI: And since you mention technology, I just wonder about how the sectors are shaking out in general right now because you've had some very pronounced divergence over the course of this year, for instance, of what sectors were working and what weren't. And of course, for much of the year, it was all about those dividend yield-centric sectors, right? Consumer staples-- STEPHEN SUTTMEIER: Uh-huh (AFFIRM). Yes. MIKE SANTOLI: --utilities, telecom. Now, they've had a sharp pullback. And I guess the big question is: Is that a change of trend? Or is that something that is a buyable? STEPHEN SUTTMEIER: It's potentially a change in trend. Right here, right now I've dialed down some of the risk in those groups because ya kinda have to. When the market broke out in July, for instance, that's when these sectors hit their relative peaks. So what I would do is try to find the ones with the bigger bases and relative strength. The sector that has that the most right here, right now appear to be the REITs over utilities and telecom. MIKE SANTOLI: Real estate investment trust, yeah. STEPHEN SUTTMEIER: So I think, if you're looking for some of those higher-yielding groups, REITs might be a good example of that. Staples is another group people lump into that, and when you look at staples, they actually topped out in February when the market bottomed, on a relative basis. So they've been underperforming ever since. But one thing we have noticed on the relative charts for individual staples' names is that equities that are tied more to the emerging markets theme seem to be outperforming in staples. And when you look at the emerging markets chart pattern, you had a bullish head-and-shoulder bottom in the spring that it broke out from. So it looks like emerging markets' turning more bullish here. And you look at the chart pattern for WTI, or crude oil, it's turning more bullish here, potential head and shoulders. And this is echoed in other sectors as well, like transports. Potential head-and-shoulders bottom. Looks like it's completing it this week. (NOISE) So we have to see how that all plays out. MIKE SANTOLI: And all those things seem to suggest-- that's the kind of a market that you would see as getting a little more aggressive or a little more comfortable with risk, or cyclical risk at least? STEPHEN SUTTMEIER: That's really what's been going on. I think rates have been lower until recently; they've started spiking up. But the one thing about it was, initially, the rate trade seemed to be benefiting not only just those higher-yielding stocks. But throughout the year, a lot of these more cyclical, growth-oriented industries started to turn and bottom. And I think that's something that has gone largely unnoticed by investors. All of a sudden, people are startin' to say, "Wait a second. What's going on with these rail stocks," you know? And I don't think everybody's all aboard on the rails, (LAUGH) you know? It's just starting, I think. MIKE SANTOLI: And they still remain below their all-time highs, right? So it's still-- STEPHEN SUTTMEIER: Well-- MIKE SANTOLI: --one of these patterns that's coming back. STEPHEN SUTTMEIER: And that's exactly what cyclicals do, you know? Most of these cyclical sectors topped out, on a relative and absolute basis, about two years ago. And now they're bottoming. And the pattern, if you flip the chart upside down, it looks the same as what happened on the top, you know what I mean? So you had the top a couple years ago, the bottom now. And that's the way cyclical stocks tend to behave. So you're startin' to see better patterns from energy, improving patterns in financials, including the banks, and interest rates tested. The huge level (?), the 2012 lows. And if that low remains intact, chances are you'll see financials do better on a relative basis. 'Cause if you look at the relative chart for financials, it's highly correlated to that ten-year note yield chart. If you look at the pattern for life insurance, tested relative lows, meaning it underperformed. Retested a low from 2012, if rates don't break that low, chances are you can get good performance from banks and life insurance and more interest-sensitive financial companies. MIKE SANTOLI: I was gonna ask ya about the really wide angle look at interest rates at ten-year Treasury yields, right? I mean, this has been going down at least in a jagged way for 30 years-- STEPHEN SUTTMEIER: Thirty-five years. (LAUGH) MIKE SANTOLI: --35 years. STEPHEN SUTTMEIER: 1981, I believe. (LAUGH) MIKE SANTOLI: And so now you do have some people at least tryin' to suggest that there are inklings that it might have reached an ultimate low. How are you going to approach that as you look at these charts to try to make that determination? STEPHEN SUTTMEIER: Well, I definitely am encouraged that we tested, undercut the low from 2012, immediately shot back through it. You know, the rhetoric that I was hearing when we tested that low was pretty much everybody adjusting models for rates lower for longer, when six months ago everybody was in a rising-rate environment. So that tells me something has changed. The other thing is, if you look at the long-term trends for yields, what tends to happen-- and we actually have this chart in our monthly chart book every month. It goes back to 1790 on ten-year note yields, not that we need to do that. But if you look towards the '50s and '40s, in the 1940s you built a base in yields that lasted about a decade. Now we're building one that's about four years old. But maybe by the time we break out, it could be six to eight years old. So what would tell me that the secular trend has turned from down to up would be if you can break the lower top from January 2014. Comes in roughly at 3.05. And people look at me quizzically like they're never gonna see that level again in their lifetimes. But that is the point. It's the lower top, last lower top in this big down trend that we've had so far. And secondly, it coincides, if you take a log scale chart of yields, meaning percentage, a percentage on a percentage, to equalize the numbers. That trend line from 1981 comes in just above that level, 3.05. So that's what we're watching. MIKE SANTOLI: It's interesting you get at kind of the psychology piece of this, right? STEPHEN SUTTMEIER: Yes, definitely. MIKE SANTOLI: You hear 3% ten-year Treasury yields which, for years, everyone assumed that's where they were headed, right? Annually, you would say, "Well, yields are gonna go up probably." But then it turned, and so that this year was like, "Wait a second. We're gonna hit 1%," right? So where does sentiment and psychology fit in to your work? STEPHEN SUTTMEIER: We look at sentiment data. Right here, right now we are concerned about the S & P 500 tactically. You know, when we look at put-call ratios, when we look at-- MIKE SANTOLI: So that's options volumes on the bullish and bearish side, yeah. STEPHEN SUTTMEIER: Yeah, so basically the put-call ratio goes up when investors are fearful and buy more puts relative to calls. And that's not happening here. And when we had Brexit, for instance, the put-call ratio was elevated. We also look at something for tactical volatility called the VXV-to-VIX ratio. So we're taking three-month volatility expectations and putting that in a ratio over the VIX. MIKE SANTOLI: Which also is a measure of people's fear or expectation of some kind of a market pullback. STEPHEN SUTTMEIER: Exactly. And both those indicators are suggesting some complacency on that tactically. MIKE SANTOLI: Got it. STEPHEN SUTTMEIER: When you overlay that with the seasonal pattern, we are still in the weakest three-month period of the year which is August through October. We're still in the weakest six-month period of the year, May through October. And it's not really sell in May and go away; it's really sell in August and go away. Most people don't realize that but that's what the charts say. But in November, we begin the best six-month, the best three-month period of the year. For instance, November through January is up about 62-63% of the time. The average return is about 3.2%. When you think about November through April, that is up about 5%, and up 70% of the time. And it's a good seasonal period. Everybody's concerned about the election. But we would be havin' the same conversation in any given year, just given the seasonal considerations about the market having trouble into October, November. MIKE SANTOLI: I wonder about how to filter out what matters in terms of seasonal effects. I only ask that because obviously they just show broad tendencies, right? It's not a rule that the market has to obey these-- STEPHEN SUTTMEIER: Right. (LAUGH) MIKE SANTOLI: --things. And when you look at a year like what we're having right now, January was down and the rest of the year has been up, which is not kinda supposed to happen. And then September, worst month of the year, was okay, right? I mean, it was flat or so. STEPHEN SUTTMEIER: Well, it's interesting. I ran numbers going into September when the S & P is above a 12-month average entering September. MIKE SANTOLI: As it was. STEPHEN SUTTMEIER: As it was, correct. And guess what? Turns are not as bad. MIKE SANTOLI: Yeah. STEPHEN SUTTMEIER: In fact, it actually almost hit the average, believe it or not-- MIKE SANTOLI: Is that right? STEPHEN SUTTMEIER: --when that occurrence happens. And the other thing is this. When you have the market up year-to-date through the third quarter, the fourth quarter tends to be much stronger than average. But what's interesting about that is October struggles a bit, and t MIKE SANTOLI: Pullback, yeah. STEPHEN SUTTMEIER: But that's not the case. When you're down through the third quarter, you actually go down in the fourth quarter on average also. Lackluster returns. And it follows that trend, which is very interesting. Because when I first started runnin' these numbers, I'm like, "Wait a second. Whether's the mean reversion that everybody talks about?" It's not there. On average, it's not there. Sometimes it can happen. But if you're trading average, and I believe the market is up in the fourth quarter after being up through the third about 82% of the time. So I don't wanna fight those odds. MIKE SANTOLI: Yeah, and I believe that if it's up through the third quarter, you've never actually had a year-to-date, like a full-year loss. In other words, you've never given up all those gains in the first through quarters through the rest of the year. STEPHEN SUTTMEIER: Yeah, I'd have to check that number. MIKE SANTOLI: No, I believe that's-- (OFF-MIC CONVERSATION) MIKE SANTOLI: Since 1950-- STEPHEN SUTTMEIER: That's it, yeah. I think that's correct for 1950. I run those things back to 1928, and I think there's a few of those where we gave it up. But (LAUGH) if I'm not mistaken-- MIKE SANTOLI: And we don't have the stock data going back to 1790 like ya have the bond market (LAUGH) stuff, right-- STEPHEN SUTTMEIER: I do, actually. But I'm not-- MIKE SANTOLI: Do you really? STEPHEN SUTTMEIER: --usin' it because-- MIKE SANTOLI: Who knows what it really is-- STEPHEN SUTTMEIER: Who knows what it really is. But the bond yield stuff, it's like I put it out there just because it does mirror the cycles in bonds. Whereas when I looked at the S & P data, it just looked off the wall, like it just didn't make any sense. (LAUGHTER) MIKE SANTOLI: Gotcha. STEPHEN SUTTMEIER: There might have been like three companies in the S & P in 1790. (LAUGHTER) MIKE SANTOLI: Exactly, yeah. STEPHEN SUTTMEIER: I don't know, there's these data sources out there where they hire people just to comb old newspapers-- MIKE SANTOLI: Exactly. Yeah. STEPHEN SUTTMEIER: --and things like that. And cross-check numbers-- MIKE SANTOLI: Well, more data's always better, but you gotta know how to use it, I guess-- STEPHEN SUTTMEIER: Exactly. (LAUGH) MIKE SANTOLI: Well, we're gonna go look at some charts anyway. And we'll see a little bit (LAUGH) more. Thanks, Steve. STEPHEN SUTTMEIER: Yeah, thank you. MIKE SANTOLI: All right. Here with Stephen Suttmeier. We have now our chart of the 20-year S & P 500. This is showing a pretty long-term trend. What is this telling you right now? STEPHEN SUTTMEIER: Sure. I mean, when you look at this chart of the S & P goin' back to the 1996 timeframe, basically what it's telling us is we had this big breakout from what we would call a secular trading range. And this happened in April of 2013. So when we think about that-- MIKE SANTOLI: So for all this time, you were kinda capped at that level-- STEPHEN SUTTMEIER: Yep. MIKE SANTOLI: #NAME? STEPHEN SUTTMEIER: And if I draw a line on it, you can see no line coming up, but that's okay. We've still got the chart levels there. So basically what happens is you break out, you retest the breakout, which we're in the process of doing now. And I think we did that in February when it got down to 1800. I think that's what was goin' on there. You had this nice consolidation within the larger bull trend. But what's very important to note here is, if we had a chart goin' back 100 years, this pattern's happened before. It happened in 1937 to 1950. (BACKGROUND VOICE) The S & P broke out in 1950. it also happened between 1966 and 1980. Big trading range, you know, led by commodities price spikes and yields. The key point here is this. Those prior breakouts had a bull market that lasted 15, 20 years. And we're three years into this one. So I think the bigger picture chart structure is quite positive when you take that into consideration. The next chart we're showin', it's just a little bit shorter term. Now, that's a pretty long cyclical bull market. It's the second-- MIKE SANTOLI: Yeah, this is your 2009 low-- STEPHEN SUTTMEIER: 2009 low. So, lotta people concerned about that. But what I try to tell people is this. Sure, the cyclical bull is long dated. But think about the context of the secular trend. Because we've had the 1974 to 1981 cyclical bull was a long one as well that broke the market out of a range. You pulled back, and then you just shot up off to the races. So I think we're in a similar process here. Going to the real, real short term, now let's just talk about technicals here. You have resistance here at the May high from 2015. November high from 2015. And then ya had in the April-June timeframe. So this was a consolidation pattern after a breakout, and that tends to be bullish when you push through. So you cleared resistance. So basically demand exceeded supply. It's a buying opportunity, we think, especially pulling back into the moving averages. So the 200-day moving average comes in roughly around 2065. Government work, a big-picture range is, "2,100-2,050's good enough for me." I do think, when we talked about tactical complacency before, it increases the potential for that to happen. But bullish seasonals starting in November suggested we should find some firm footing. And it wouldn't surprise me to see the market work its way up to that 2,225, and over time, 2,300 is potentially possible. MIKE SANTOLI: Here. So that's the post (PHONE) Brexit sell-off that was very brief. STEPHEN SUTTMEIER: Right here? MIKE SANTOLI: Right in there, sorry. This-- STEPHEN SUTTMEIER: Yep, that's the one. Yep. MIKE SANTOLI: --is-- this is January/February-- STEPHEN SUTTMEIER: That's February, yep. MIKE SANTOLI: Does it often take some kind of a sharp break to kind of then slingshot the market higher? Or can you just sorta sit around here for a little while and then even gather the energy to go to a new high? STEPHEN SUTTMEIER: It can happen either way. I think in this particular case, it might require another dip down, just given the complacency we're seeing in put-call ratios and VXV-to-VIX ratio. And that would make me a lot more comfortable, buying the market-- MIKE SANTOLI: So you got a little shakeout and then-- STEPHEN SUTTMEIER: I've generally done well with the bottoms when VXV-to-VIX is below one, and when the put-call ratio is a lot higher. Another thing that's going on that's very similar coming into Brexit. advance-to-client (PH) line's goin' to new highs. Heads-and-shoulders bottoms. They're different head-and-shoulders bottoms, but emerging markets was breaking out head-and-shoulders bottom around Brexit. Now we got oil doin' that, potentially. We also got transports doin' that, potentially. So speakin' of transports-- MIKE SANTOLI: To advance-to-client speaks to it's been a kinda broad advance-- STEPHEN SUTTMEIER: Exactly. STEPHEN SUTTMEIER: Yep. The breadth of the mo-- market's p-- positive, and that's what you wanna see. And the advance-to-client line can be a pretty good leading indicator. So we hit-- the traditional stocks only advance-to-client line's actually hit new highs, believe it or not, in late September. And-- we track one called the most advance-to-client line, 15 stocks. But the most important ones in terms of share volume, that went to a new high on Wednesday. And whenever I see that go to a new high, it tells me the market is under accumulation. Somebody who's smart-- MIKE SANTOLI: Which is different, by the way, than much of last year, correct STEPHEN SUTTMEIER: Exactly. MIKE SANTOLI: Last year's a very narrow market. STEPHEN SUTTMEIER: Exactly. Actually, that's a good point because the most active advance-to-client line topped out here; the market topped out a month later, you know? (BACKGROUND VOICE) We had a double bottom here, most active advance-to-client line broke out along with the market. Another thing we haven't talked about is high yield. I mean, that continues to go to new highs too. MIKE SANTOLI: Right. High-yield bonds, yeah. STEPHEN SUTTMEIER: High-yield bonds, that's correct. And, yes. And they-- they keep goin' to new highs. So if you look at option-adjusted spreads and high yield bonds, and overlay the chart of now versus '08 or 2012, it looks a lot more like 2012 than '08. A more benign-- MIKE SANTOLI: So it's not giving you-- MIKE SANTOLI: any kind of warning signal that (BACKGROUND VOICE) credit makes are in trouble, right. STEPHEN SUTTMEIER: Not really, no. MIKE SANTOLI: Yeah. Sure. Got it. STEPHEN SUTTMEIER: So basically, prior resistance turns to support. That happens quite often. So we expect demand to be found in this market in that 2,100 to 2,050 range. We get that draw down that we think can happen. And then this is just bigger picture. The key point of this chart, real easy, it's we're coming off this low of 2011. Very similar to what we're doing here. So we think we have a cyclical pullback here. Break out into a new, you know, rally mode from 2012 onward. Did the same sorta thing here, all right they didn't correct as much on absolute basis. But a lotta stocks did fall apart. It was big CAPs holdin' that up. But I think there's a bullish sign that suggests we should be buying dips, similar to 2011. MIKE SANTOLI: And what does it tell you in terms of magnitude of potential upside? You earlier made a mention of kind of a mead target-- STEPHEN SUTTMEIER: Yes. STEPHEN SUTTMEIER: Great question. The measured target basically, if you look at that trading range we had on the first page, broke out about 1576. History would suggest, based on the 1950s and 1980s breakouts, that you could get a rally 50-60% from the breakout point. MIKE SANTOLI: That point, I see. STEPHEN SUTTMEIER: And guess what, the measured move of that pattern gets ya to that level. There's one around 2330, and there's one around 2425. And, quite frankly, this is-- this is mind boggling, a part it. In the 50s and the '80s, you actually reach those four years later. Now, I'm not sayin' that we're gonna reach 2,400 next year, but is it a possibility? Based on history-- MIKE SANTOLI: It would match up with that. STEPHEN SUTTMEIER: It would match up. MIKE SANTOLI: With that pace, yeah. STEPHEN SUTTMEIER: And another thing I noticed is, when ya look at those other bull markets, it takes a while for it to catch on. Like right now, there's not euphoria here. Yes, there's little complacency based on fast money, I think, given the put-calls and the BXV. But overall, investor sentiment levels are not euphoric at this point. So I think it's a buy DIPs in the context of this bigger picture pattern. MIKE SANTOLI: Sure. We're gonna look at some of the DOW indexes, I think. STEPHEN SUTTMEIER: And another thing that confirms this for me is head-and-shoulders bottom, which we were (BACKGROUND VOICE) talking about. I mean, it doesn't show up on this-- MIKE SANTOLI: DOW transportation effort-- STEPHEN SUTTMEIER: This is the DOW transportations, thank you very much. So in terms of the daily chart with the inter-day, it would show up better. But there's this head-and-shoulders bottom developing. And dial theory is interesting. So the transports functional confirm the DOW industrials break through the April high. So what does that mean? It means both the transports and the industrials are now in uptrends from the February lows. Before, it was just the individuals. Now ya have the transports joining them. In terms of the DOW theory, it transfers that from a sell to a buy signal. Now, granted, this was created by Charles Dow over 100 years ago. Is it a market timing indicator? Of course not. It's more of an economic barometer that he used. So it suggests to us that cyclical sectors are improving. And this is encouraging. If I was to focus on what groups inside transportation look real good, the rails are the ones with the best patterns coming off lows. And then when you're lookin' at, say, the industrials, you can see it's very similar to the S & P, a breakout retest. And now that the transports have cleared that high on a closing basis, it gives me confidence that the rally should continue-- MIKE SANTOLI: Now, the transports have cleared, what? Is it a one-year high are they at? They essentially are not at a new high though, like the DOW industrials are. STEPHEN SUTTMEIER: No. No, and that's necessary for the DOW-- MIKE SANTOLI: Oh, it's not? Okay. STEPHEN SUTTMEIER: I think some people would interpret that way. But when ya think about the DOW theory, (BACKGROUND VOICE) it's really just the trends off the lows that you have to consider. Because this is an uptrend, you can see it. It's harder to see because we just started breaking out. But, you know, low, higher low, and you had a higher high here, you know. And that's really what it's all about. I mean, believe it or not, we actually had a very similar signal on the DOW theory moving into early 2013. The industrials broke out well in advance of the transports. And then in January 2013, the transports confirmed that breakout. MIKE SANTOLI: Gotcha. So all of it's kinda saying that the market below the surface is kind of in gear? STEPHEN SUTTMEIER: It's in gear. If you have strong breath, you got leadership from tech, which is always good. You've got improving financials, which is a positive. The one sector that (BACKGROUND VOICE) doesn't participate as much is discretionary. And I think if you look at the potential head-and-shoulders bottom on oil, that probably tells ya that story pretty well. MIKE SANTOLI: Yeah. All right. Well, charts generally encouraging. Appreciate the look at 'em. Thank you very much, Steve. STEPHEN SUTTMEIER: Thank you. MIKE SANTOLI: Great.

"Bullish seasonality starting in November suggests that we should find some firm footing," said Suttmeier during the interview. "It wouldn't surprise me to see the market work its way up to that 2,225 [level] and over time, 2,300 is potentially possible."

The 2,300 projection from the technical strategist for the represents a move of 7.5 percent from Wednesday's close.

In this two-part conversation, Suttmeier first lays out his investment approach and then uses charts to build his case. The technician also discusses:

His long-term outlook for the S&P 500.
How to play rising rates.
The key technical indicators every investor uses.

PRO subscribers can also read the entire transcript of the exclusive interview below.

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