With some of tech's biggest names scheduled to report earnings this week, one top technician sees some signs of trouble in the charts.
Apple, Amazon and Alphabet are three of the "tech titans" that Carter Worth of Cornerstone Macro believes could send the market falling should their earnings reports falter. Friday on CNBC's "Options Action," Worth took a look at what he sees as three signs of a tech threat to the market.
First, Worth sees what he calls a "check back" on the way for tech stocks. On a chart featuring the top five S&P 500 tech stocks at equal weight, Worth points out that for the last few years, tech has tended to pull back toward where he sees an upward trending line. Even with Microsoft's surge last Thursday after the company's earnings beat, Worth still predicts that a "check back" is in store that will see tech stocks fall.
But the real worry comes when you compare tech to the broader market, according to Worth. The same top five tech stocks have been rising while the S&P 500 has actually stayed relatively flat for the last two years.
On top of that, the Nasdaq 100 ETF (QQQ) that mostly tracks tech stocks has made higher highs, but not when measured relative to the S&P 500. "It means that after all this steepness, we're not actually still making relative highs on the market on a one-year basis," said Worth.
Given all of that, Worth believes that should the remaining big tech names fall on earnings, the market could be set for a drop given how heavily tech weighs on the market.
Apple is set to report earnings Tuesday after the bell, followed by Alphabet and Amazon on Thursday. So far, tech has seen a strong earnings season with Netflix posting an unexpected beat last Monday that sent the stock surging. Intel fell about 4 percent after-hours trading last Tuesday after it posted earnings.