Tech could soon turn into the market's headache: Wells Fargo's Chris Harvey

  • The proliferation of die-hard tech bulls is making one analyst fearful that the end of its reign might be close.
  • A turn for tech stocks would spell trouble for the rest of the market, warns Chris Harvey of Wells Fargo.

The technology sector has been riding high this year with the seemingly invincible FANG names leading the way. But the proliferation of die-hard tech bulls is making one analyst fearful that the end of its reign might be close.

"We're a little bit concerned about the tech trade," Chris Harvey, head of equity strategy at Wells Fargo, told CNBC's "Futures Now" on Thursday. "When we become concerned is when things become great and...when everyone's super positive."

Even after an 11 percent run-up so far this year, the bulk of analysts rate the XLK technology ETF positively. Of those surveyed by FactSet, nearly 60 percent have a buy or overweight rating, while 36 percent have a hold position.

"Believe it or not, what we say, it's when good becomes great. We think great is bad," he said of when he gets bearish.

It's not quite time to jump ship on technology, says Harvey.

"We are reluctantly holding on. We are getting ready to get ready. We're not there yet but we're looking for those signs," he explained. "More people are positive on the sector. As we talk to clients, they're starting to capitulate and value players that weren't involved in this space are starting to buy into the space. Those are usually signs that we're late in the cycle and that gets us concerned."

A turn for tech stocks would spell trouble for the rest of the market, warns Harvey.

"The tech sector is more than 25 percent of the S&P 500 so it would be bad for the broader market. We expect that if the tech sector stumbled you would see the equity sector stumble," he said.

The information technology is neck-and-neck with the consumer discretionary sector as best S&P 500 performer this year. Consumer discretionary holds Netflix and Amazon, two FANG names many consider straddle the consumer and tech sectors.

The information technology sector has added nearly 13 percent for the year, while the S&P 500 is up 3 percent.

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