This wake up call has made me skeptical about the rally, analyst says

The market’s reversal on Friday has one technician warning of a possible “wake up call” for bulls.

In an interview last week with CNBC’s “Futures Now,” T3 Live chief technical strategist Scott Redler presented one chart that suggested a move up to 2,470 for the S&P 500 Index before the end of June. According to Redler, the index had managed to stay above the 8-day moving average trendline even on shallow drops, which at the time led him to predict that more highs were ahead.

“Every time we hit the 8-day, which we did [on Wednesday at about 2,424 or 2,426], we’ve been holding that,” explained Redler. “So until that trend changes, traders are trying to ride it so that way they can stay safe and profitable.”

He added that if the index “can get above 2,440, which is the last pivot high, I do think that we can hit 2,470 by the end of the quarter,” he added, as he sees the 8-day moving average line extending to around that level.

Yet once the tech sector was hit on Friday and dragged down the market, Redler changed his outlook on the markets. The S&P and Nasdaq Composite hit record highs on Friday morning, but the tech sector dropped almost 3 percent during the day, wiping out those gains.

According to Redler, while the S&P 500 did break above the 2,440 level that he had said was a key level to hold if the market were to move higher, the S&P’s failure to maintain the level has led him to now be more cautious.

The main reason, Redler told CNBC on Friday, is that a loss of momentum — in this case in technology shares — can sometimes lead to a “reversal pattern” that could hint at a bigger drop.

Redler had also predicted on “Futures Now” that if the S&P were to drop to the 21-day moving average line in his original chart, which means the index would fall to around 2,411, that could be a potentially troubling level for the index.