By some measures, investors are more crowded into technology stocks than ever before.
Information technology is the best-performing sector this year. Shares of Apple just surged on its earnings Tuesday, sending the Dow Jones industrial average to new heights. And according to a new Bank of America Merrill Lynch report, mutual funds' exposure to technology reached a record "overweight" position last month.
One technical analyst says this might not be a good thing.
In fact, Rich Ross of Evercore ISI said in a recent interview that he has been recommending to clients in the last month to position themselves as underweight in technology stocks, and said a chart of one of the most popular technology exchange-traded funds, the XLK, is flashing a "very troubling sign."
Ross said he has recommended this underweight position in technology as the S&P 500 enters its worst two months of the year (August and September) with "stocks at record highs, volatility at record lows, and more importantly" what he sees as a "tactical sell signal" in a chart of the XLK.
The fund has risen nearly 19 percent this year.
"We see a false breakout to an all-time high and clear signs of exhaustion, a bearish reversal here. And once again you're looking at a potential double top at the high end of that trading range; we could just as easily go to the low end of that range where we were just a month ago. So, once again, we are poised here on the back of that resistance for weakness in technology more broadly," Ross, head of technical analysis, said Tuesday on CNBC's "Trading Nation."
"And, if we look at a subsector, let's look at the hottest subsector of technology the semiconductors," he said, referring to the SMH, a popular exchange-traded fund that tracks semiconductor stocks.
In some ways, Ross said the group is almost a bit worse off than technology. In the SMH, he sees a similar "exhaustive" reversal that he has observed recently in the XLK. Specifically, the fund failed to reach a "higher high," and as a whole the setup appears weak heading into August and September.
These signs of exhaustion in the technology space give Ross pause about the space as a whole. The XLK was trading slightly higher on Wednesday.
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As Apple surges to all-time high, analyst sees a 'very troubling sign' for technology stocks - CNBC