Are AI Fears Overblown?
Maybe, maybe not. What really matters is what the charts are telling us.
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Remember when AI was good? Remember when AI fueled the market? Remember when any stock that had anything to do with AI, even tangentially, zoomed upward like it was going to save the world?
Well, markets are funny like that, aren’t they? Now the chatter is ‘they are spending too much on AI’. But my very favorite is that it seems AI is going to disrupt every single business to the point of extinction.
It started a few weeks ago with software. No one was ever going to need anyone to write code ever again. Nope, we were all going to do it with the push of a button. Then, earlier this week, AI was going to ruin the financial services industry. No one was ever going to need a financial advisor again.
On Thursday, we discovered that AI was going to take over shipping and logistics. That sent the Transports down four percent.
I have trouble remembering exactly when it was, but I am reminded of when Amazon announced it was getting into some aspect of retail that took Costco down by like a gazillion points. Meanwhile, Costco has done just fine since then.
Or what about when Amazon was getting into the prescription drug delivery business? The stocks cratered. As best I can tell, selling prescriptions has not been a huge business for Amazon.
This is not to say that AI won’t disrupt anything—heck, it will probably disrupt everything—but Wall Street has a way of glomming onto a theme and pushing it to excess. It seems that this is where we are now. And I guess it’s a good thing AI can’t make toothpaste yet, or the Staples stocks would have gotten clocked on Thursday, too.
In the meantime, IGV did not make a lower low. Neither did Nasdaq. But I continue to watch the number of stocks making new lows. What I’m watching is the fact that for one day, the new lows on Nasdaq were fewer than last Thursday by about 200 issues. That’s a minor change.
The NYSE was not so lucky, though. You see, while everyone was so focused on tech stocks, they forgot to look at XLF, which sliced through its 200-day moving average line. It has some good support at 51. Bulls do not want to see that break. Keep in mind, we came into this year with folks very bulled up on financials.
The NYSE saw a rise in stocks making new lows, which is concerning since it tells us the selling has spread from tech stocks.
Sentiment-wise wise we don’t have anything much in the way of statistics except that the ten-day moving average of the put/call ratio is now at .92. But anecdotally, I see some of the folks who were shrugging and pleased as pie to buy software stocks last week have quieted down and are now taking a more ‘wait and see’ attitude. That’s how we change sentiment.
