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These 'under the surface' signs could push the market higher

Despite an unusually narrow trading range in the market, one technician sees signs beneath the surface that may suggest stocks are headed higher.

"My argument is that even though the market has been in a very narrow range, leadership and performance under the surface has actually been supportive," Chris Verrone, head of technical analysis at Strategas Partners said in a recent CNBC "Fast Money" interview.

"Beta [a volatile asset that does well as the overall market is rising] has outperformed and semis, a pro-cyclical group, are doing very well."

The PHLX semiconductor index has risen more than 20 percent in 2016, and may yet add to those gains, Verrone said.

"High-beta stocks have out-performed by 300 basis points over the last 20 days. That shows investors are seeking risk, not being risk averse," Verrone explained.

The bullish tone of stocks, however, has yet to translate into the real economy, which has seen growth barely above 1 percent. However, some economists have high hopes for the third quarter, with analysts at Capital Economics expecting Q3 growth to exceed 3 percent, based on recent data.

In theory, an improving economy should bode well for stocks.

"When we look at some of the leadership stories out there semiconductors made new absolute highs and new relative highs this week," Verrone told CNBC. He pointed to the outperformance in names like Microchip and Microsemi, up 7 and 9 percent respectively in the last month.

He noted that homebuilders, another pro-cyclical group, has shown signs of quickening. The XHB homebuilders ETF is up 15 percent in the last six months.

"We think that is consistent with a market that wants to go up, not down," he added.

Still, there are some caveats. Verrone's thesis comes ahead of a historically tough month for stocks.

According to Jeffrey Hirsch of the Stock Trader's Almanac, September is the worst performing month of the year for the major indices. But that could prove untrue during an election cycle.

"September's performance does improve slightly in election years, but it is still negative nearly across the board," he wrote in a recent note.

"Only the Russell 1000 and Russell 2000 have been able to escape negative territory and post modest 0.2 percent and 0.7 percent average gains, respectively, in the last nine election year Septembers," the analyst said.

Correction: This story was revised to correct that beta refers to a volatile asset that does well as the overall market is rising.