Tech is powering the rally in an ‘uneven market,’ macro expert says

Technology stocks' big gains this year have contributed a disproportionate amount to the market's rally, and that has some concerned about tech's next move.

Larry McDonald, editor of the Bear Traps Report, explained on CNBC's "Trading Nation" why he's warning against stepping into tech at these levels.

• While the S&P 500 has risen nearly 4 percent this year, much of the market's gains have come from two big stocks' rallies: Microsoft and Amazon, up a respective 19 percent and 44 percent in 2018.

• Six other stocks (Apple, Netflix, Intel, Mastercard, Nvidia and Facebook) make up much of the market's positive return this year. That concentration raises concerns, creating an uneven market with its gains distributed mostly among a select few tech heavyweights. This composition within the market sometimes leads to the fear that a sector is getting "crowded."

• Investors have been hiding out in big tech amid mounting trade-related tensions, political unrest abroad and a recent sell-off in emerging markets.

Bottom line: A handful of technology stocks are adding outsized gains to the market's overall rally this year, and that has McDonald concerned about growing risk in the sector.

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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 CNBC and 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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