What could drive stocks higher (Hint: not earnings)

It's not first quarter earnings that could shock the market into rally mode, according to one market technician, it's tech.

"I think the tech sector here is really standing out to me as something that could lift the whole market with it," Oppenheimer Technical Analyst Ari Wald said Monday on CNBC's "Trading Nation."

The Technology Select Sector SPDR ETF, the XLK, which represents nearly a fifth of the S&P 500 by market cap, recently hit new multiyear highs. And by Wald's work, this fresh high, combined with the relative strength against the S&P 500, is a sign of leadership for the sector.

"I think if the XLK can break out to new highs," said Wald. "I think that could take the market with it."

With many names in the tech sector trading well below their 52-week highs, Wald points out that it's significant that XLK was able to break above formidable resistance.


The sector has managed impressive performance relative to the S&P, as the bottom panel of Wald's chart shows.

On the other side, Max Wolff of Manhattan Venture Partners says earnings may give earnings more of a jolt than expected.

"We think it's going to be a story of serious divergence [from last year's reports]," Wolff said Monday on CNBC's "Trading Nation." "We think we're going to see some big earnings misses" that might not necessarily be priced into the market at current levels.

Even if earnings hit or mildly beat expectations, S&P 500 companies will still report their third-straight quarter of losses in what many are calling an "earnings recession."

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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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