The warning from tech comes as a number of strategists say the market could see a shallow pull back after a long run without a 5 percent or greater correction.
Hunter said the size of the sell-off could be determined by how much investors move into the underperforming sectors like energy and financials. The last time the S&P pulled back by 5 percent or more was just ahead of the election when it gave back 5 percent. There also was a sell-off after the June 2016 Brexit vote of 6 percent. The last large correction was the more than 11 percent pullback that ended in February 2016.
"It's a question of whether there's going to be a rotation going from growth to things like financials or energy , or are you going to have to see the S&P 500 have an overall correction of 8 to 10 percent as we move into fall?" he said. "We haven't really come to a solid answer just yet." Hunter said he is recommending investors move some funds from tech into financials to prepare for the possible pullback. "Whether it's a much more significant correction into the fall, it's too soon to make that call."
The size of Wednesday's move was not that big, and Nasdaq recovered in afternoon trading. But it's more about the momentum and sentiment in a market that has been content to drift higher with little volatility all summer.
"Tech was the heartbeat of the market, with its move to all-time highs. It could go from being a tail wind to more of a headwind at least for the month of August. They're selling strength instead of buying it," said Scott Redler, partner with T3Live. com. "The bears haven't had enough power to break it down — yet."
Redler said the Nasdaq held its 21-day moving average, a sign that there is still buying interest at current levels. "Maybe the active bulls live to fight another day, but I still think there's a dose of skepticism ... I still think it's very price specific and very stock specific. As far as the next few weeks go, there's a bit of a downside bias in technology."
FANG stocks — Facebook, Amazon, and Netflix — erased much of their losses by Wednesday's close.
Redler said the PowerShares QQQ Trust ETF, which represents the Nasdaq 100, was important to watch if it could move above $144 to $144.45. The ETF closed at $143.95. Last Thursday, the QQQ had an "outside day," when it closed below the previous day's lows, a warning for technicians.
"Either way it feels like there's caution in the air, rather than ... the fear of missing out," said Redler. "Apple could be its own little island. It didn't have a pre-earnings run. There was a lot more caution around it. It might be able to hold up better than other tech."
Whether that rotation into financials takes place also has a lot to do with interest rates, Hunter said.
"The interest rate component is a big part of it for us," he said. Rising rates driven by stronger economic data would be a positive for a group like financials, the second-biggest sector in the S&P. "That would keep the S&P in a healthy spot. We really need to see rates back up here."
Hunter said he's watching to see if the five-year note yield can get through 2 percent, as higher rates drive bank earnings. The five-year was at 1.81 percent Wednesday. He said it would help if the 10-year yield rose to 2.45 percent, from its current 2.26 percent.
The S&P energy sector has gained 2.5 percent in the last month, but it is down 11.7 percent year to date. The financial sector is up 8.4 percent for the year so far, but the tech sector has risen 22 percent.
David Bianco, chief investment strategist, Americas, at Deutsche Asset Management, is also watching interest rates. "If the 10-year goes lower and the expectations go lower on Fed hiking, that could dampen the expectation for earnings and for financial stocks," he said.
Bianco also said the market was at risk of a sell-off after Labor Day, but he pointed to some of the uncertainty out of Washington over policy. He said if there are signs that tax legislation can be approved, that would be a positive for the market.
"Without the tax cut, there's not much upside. ... These interest rates are good for P/E multiples, but what about banks? If the 10-year yield is at these levels that would be a signal for markets ... that the Fed is being too aggressive. Right now the bond market is saying go slowly," he said.
For that reason, the market is heavily focused on data, and Hunter said this Friday's jobs report and CPI inflation next Friday could be major events for markets.