The AI trade has been one of the most important sources of upside leadership for the market, but its technical profile has weakened meaningfully in recent weeks. The Global X Artificial Intelligence & Technology ETF (AIQ) has seen a significant correction in both absolute and relative terms, presenting a challenge for the group in the third quarter. AIQ has retreated nearly 19% since peaking last month. The weekly MACD has shifted to a “sell” signal, which is a bearish development for the next several weeks and suggests the correction has not yet fully run its course. The weekly stochastics are also pointing lower, reinforcing the loss of upside momentum after the ETF became extended in June. The composition of AIQ helps explain why the correction has been so important for the broader market. Its top holdings include several stocks that have been central to the AI trade, including SK Hynix , Micron , AMD , Apple , and NVIDIA . This gives AIQ meaningful exposure to semiconductors, AI infrastructure, and mega-cap technology, making it a useful proxy for the broader AI theme. The daily chart suggests AIQ is due for near-term stabilization before the next leg lower unfolds. The ETF has become short-term oversold and is testing support from the daily cloud model, which is a natural area for a bounce to unfold. This should help alleviate some of the immediate downside pressure, but it does not negate the deterioration in intermediate-term momentum on the weekly chart. We would view a near-term rebound as an interruption in the correction rather than the start of a renewed uptrend. Initial resistance is at the 50-day moving average and daily cloud, in the $64-$65 zone. A breakdown below cloud-based support near $57 would officially reverse the uptrend off the March low and increase immediate downside risk toward secondary support near $54, which is defined by former resistance. The relative chart has a similar takeaway. AIQ has broken down versus the SPX after a strong period of outperformance, confirming that leadership has shifted away from the AI trade. The ratio is oversold in the short term, so brief relative stabilization would be natural, but the loss of momentum is meaningful enough to suggest additional underperformance is likely this summer. While AIQ remains in a long-term uptrend, a significant loss of momentum suggests it is prone to an intermediate-term correction. Short-term oversold conditions should allow for stabilization in AI stocks in the very near term, but we would use strength as an opportunity to reduce exposure until momentum improves. —Katie Stockton with Will Tamplin Access research from Fairlead Strategies for free here . DISCLOSURES: None All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, or its parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer. Fairlead Strategies Disclaimer: This communication has been prepared by Fairlead Strategies LLC (“Fairlead Strategies”) for informational purposes only. This material is for illustration and discussion purposes and not intended to be, nor construed as, financial, legal, tax or investment advice. You should consult appropriate advisors concerning such matters. This material presents information through the date indicated, reflecting the author’s current expectations, and is subject to revision by the author, though the author is under no obligation to do so. This material may contain commentary on broad-based indices, market conditions, different types of securities, and cryptocurrencies, using the discipline of technical analysis, which evaluates the demand and supply based on market pricing. The views expressed herein are solely those of the author. This material should not be construed as a recommendation, or advice or an offer or solicitation with respect to the purchase or sale of any investment. The information is not intended to provide a basis on which you could make an investment decision on any particular security or its issuer. This document is intended for CNBC Pro subscribers only and is not for distribution to the general public. Certain information has been provided by and/or is based on third party sources and, although such information is believed to be reliable, no representation is made with respect to the accuracy, completeness, or timeliness of such information. This information may be subject to change without notice. Fairlead Strategies undertakes no obligation to maintain or update this material based on subsequent information and events or to provide you with any additional or supplemental information or any update to or correction of the information contained herein. Fairlead Strategies, its officers, employees, affiliates and partners shall not be liable to any person in any way whatsoever for any losses, costs, or claims for your reliance on this material. Nothing herein is, or shall be relied on as, a promise or representation as to future performance. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. Opinions expressed in this material may differ or be contrary to opinions expressed, or actions taken, by Fairlead Strategies or its affiliates, or their respective officers, directors, or employees. In addition, any opinions and assumptions expressed herein are made as of the date of this communication and are subject to change and/or withdrawal without notice. Fairlead Strategies or its affiliates may have positions in financial instruments mentioned, may have acquired such positions at prices no longer available, and may have interests different from or adverse to your interests or inconsistent with the advice herein. Any investments made are made under the same terms as nonaffiliated investors and do not constitute a controlling interest. No liability is accepted by Fairlead Strategies, its officers, employees, affiliates, or partners for any losses that may arise from any use of the information contained herein. Any financial instruments mentioned herein are speculative in nature and may involve risk to principal and interest. Any prices or levels shown are either historical or purely indicative. This material does not take into account the particular investment objectives or financial circumstances, objectives or needs of any specific investor, and are not intended as recommendations of particular securities, investment products, or other financial products or strategies to particular clients. Securities, investment products, other financial products or strategies discussed herein may not be suitable for all investors. The recipient of this information must make its own independent decisions regarding any securities, investment products or other financial products mentioned herein. The material should not be provided to any person in a jurisdiction where its provision or use would be contrary to local laws, rules, or regulations. This material is not to be reproduced or redistributed absent the written consent of Fairlead Strategies.
Don’t be fooled by an AI stock bounce. Charts suggest more downside ahead
