Monday was a tough session; six sectors were higher, but most active names were mostly lower.

Heat Map

Major names are taking it on the chin, but the momentum crowd found comfort in Health Care (XLV).

There are tons of worrisome trends, but the most puzzling one is the sell-off in Financials (XLF), which are getting crushed relative to the broader market.

Breadth

Market breadth was gnarly, especially the NASDAQ Composite.  Decliners dwarfed advancers 3,343 to 1,453, and 330 new lows to 180 new highs.

Market Breadth	NYSE	NASDAQ
Advancers	726	1,453
Decliners	2,035	3,343
New Highs	172	180
New Lows	104	330
Up Volume	1.66 billion	2.7 billion
Down Volume	3.98 billion	5.65 billion

A month ago, the “broadening rally” was a positive narrative and a reason to increase bullishness. That has unraveled quickly.

Low volatility was the only place to hide out yesterday.

Anthropic’s “Claude” strikes again, and this time International Business Machines (IBM) is the victim. Look at the chart; it's clear someone knew something was brewing.

Today’s Session

A research report from a long-time technology bear helped send the market lower. Citrini Research based the report on a future in which AI could help users find cheaper alternatives for ride sharing and food delivery.

The report slammed shares of Uber (UBER) and DoorDash (DASH), which I would note were already under pressure. The negative narrative has the upper hand, and shorts and perma-bears are laying it on thick.  When stocks lurch into freefall mode, not only is the path of least resistance to the downside, but each negative vice is amplified, even if some that have been wrong for years decrease.

Although opinion is protected speech, there is no doubt that this is manipulation. Now the onus is on businesses to prove they are AI-proof, or can withstand competition driven by AI and AI users, to command the same level of valuation they once enjoyed.

That is a tall task.  Stocks are oversold, and a few will prove to be extremely oversold, yet many of these names will fade from our screens and eventually cease to exist.

Slammed on Hypothetical Thesis

Sea of Red

This is the tough part for investors. These downside moves have been occurring at a rapid pace and with broad breadth. Taking a hit on a stock that turns out to be a false alarm is a legitimate concern, but listening to the market and staying in the game are more important, so don’t base closing positions on emotions.

Software damage was magnificent coming into this week (see below).

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