Professional traders are not impressed with the Dow rally, driven by Boeing, Apple and a few banks.

August is typically a down month: The S&P 500 has on average dropped 2.1 percent this month since 2010, according to the analytics tool Kensho. Right on schedule, the August slowdown has emerged.

The issue is whether this will morph into something bigger. Consider the following:

  1. The S&P 500, after an exceptionally strong June, has gotten stuck and is treading water for the past three weeks.
  2. After a strong summer, the Russell 2000 has dropped below its 50-day moving average and has been down for six of the last eight trading sessions.
  3. There has been a palpable slowdown in the pace of high-momentum technology shares. They are no longer on the “new highs” list. FANG stocks have lost momentum. Amazon is failing at its 50-day moving average. Google parent Alphabet has broken its uptrend. Netflix gapped up on good earnings and guidance, but has been drifting lower since then.

“FAANG” this week

Amazon: down 3.2 percent
Netflix: down 2.6 percent
Facebook: down 2.2 percent
Google: down 1.9 percent
Apple: up 4.1 percent

The other big tech momentum play — semiconductors — has also weakened (NVIDIA is the exception). The S&P Semiconductor ETF (XSD) topped out in June and is about 7 percent off its highs.

Semis this week

Cirrus Logic: down 5.3 percent
Advanced Micro Devices: down 4.8 percent
Micron Technology: down 3.7 percent
Skyworks Solutions: down 2.2 percent

Energy stocks, which were expected to supply a very large part of the earnings gains for Q2 and Q3, have been disappointing. Shares of Apache, Oasis, Concho and Noble Energy are all down notably on earnings.

Energy earnings disappoint
(this week)

Pioneer Natural Resources: down 17 percent
Apache: down 12 percent
Noble Energy: down 12 percent
Concho Resources: down 10 percent

Does the loss of momentum names necessarily mean the rally is over? No. Other sectors may rotate into leadership positions. There is some indication this is happening already. We have seen financials make a modest move recently — the S&P Financial Sector hit a nine-year high today. And industrial names — particularly defense and those with global exposure — remain strong.

Financials at new highs: Morgan Stanley, Lincoln National, PNC, American Express, Hartford Financials, Allstate, Travelers, Progressive, Chubb, Aon.

Industrials at new highs: Rockwell Collins, Deere, Lockheed Martin, Honeywell, Raytheon, Northrup Grumman.

However, so much money is in the big momentum names (FANG, Semis), that you need to be very vigilant. When you are dealing with momentum stocks, a shift in momentum will easily initiate a shift in positioning — in other words, one day, you just get a hell of a lot of people dumping out. This usually occurs at inflection points for stocks that tell short-term investors that a longer-term uptrend is in trouble.

Are we there yet? It’s not clear, but it is clear that price momentum is waning.

A different, slightly more troubling, issue is the market response to what can only be described as excellent earnings. Bulls were looking for a further breakout on earnings, but the overall reaction of the market has been, “meh.”

Bulls are arguing that the S&P saw its run-up going into earnings season and it is typical to consolidate (move sideways) after such a move. That is the crux of the debate.

Disclosure: NBCUniversal, parent of CNBC, is a minority investor in Kensho.

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