Choppy Indices, Defensive Leadership, and Expanding AI Disruption
Weekly Outlook 02/16/26
Market Recap
This was another choppy week beneath the surface.
SPY 0.00%↑ and QQQ 0.00%↑ remain rangebound, but importantly both are trading under the 50sma yet again. In a sideways market, the moving average doesn’t matter as much, but the slope rolling over shows that momentum has clearly weakened. Every reclaim attempt has failed to produce sustained momentum.
The indices are not truly broken. There is no impulsive downside expansion. But structurally, this is not a healthy tape either. It is a grind lower with failed rallies.
IWM 0.00%↑ and DIA 0.00%↑ continue to tell a slightly different story. Both remain in defined uptrends. Small caps and industrials are holding structure far better than large cap growth.
That divergence matters.
We are in a split market. Growth is weak. Broader value and industrial exposure is holding.
The environment remains choppy and leaning bearish until proven otherwise.
Leadership - Not Healthy
XLP 0.00%↑ and XLU 0.00%↑ have been rallying. When money flows into staples and utilities, that is traditionally risk off behaviour. Investors are prioritising defensives over growth.
At the same time, XLE 0.00%↑ and XLI 0.00%↑ remain strong. Energy and industrials continue to benefit from the infrastructure and AI build out narrative. Power demand, grid expansion and capex cycles are supporting these groups.
This is not broad risk appetite. It is selective capital allocation.
That is why the tape feels difficult. Leadership is fragmented.
Growth & Risk Assets
ARKK 0.00%↑ remains under its 200sma. That alone tells you speculative growth is not in favour.
Bitcoin has bounced but remains fairly sideways. Given it is in a major downtrend across higher timeframes, this consolidation is not surprising. Until trend shifts, rallies are tactical rather than structural.
MAGS 0.00%↑ broke its range this week. However, it has done so directly into the 200sma.
This is a pivotal area:
Bullish scenario - Undercut and reclaim of this level, followed by expansion and hold.
Bearish scenario - Failure at the 200sma and continuation lower. That would reinforce the idea that mega cap leadership is deteriorating.
This is one of the more important tells going into next week.
AI Disruption Spreading Across Sectors
One of the more important themes this year has been AI disruption compressing software multiples. Since the start of the year, many software names have sold off as AI coding tools and automation pressures raised questions around long term margins and competitive moats.
That theme broadened this week.
Financials were hit after Altruist introduced AI-powered tax planning inside its Hazel platform, positioning it as a tool that allows advisors to generate tax strategies in minutes. The reaction in names like SCHW reflected the market’s sensitivity to AI eating into traditional service models.
Later in the week, freight stocks also saw sharp selling as AI-driven logistics and optimisation concerns resurfaced. Whether justified or not, the market is clearly repricing businesses where automation risk is high.
This is becoming a cross-sector narrative.
It is no longer just software being questioned. The market is actively assessing which industries can be streamlined, automated, or margin compressed by AI tools.
That does not mean every move is rational or sustainable. But when a theme spreads across multiple sectors, it deserves attention.
If this continues, we may see:
Defensive flows persist
Higher multiple service businesses struggle
Capital rotate further into hard assets and infrastructure
In other words, the split tape dynamic makes more sense in the context of disruption risk.
This is a theme worth monitoring closely in the weeks ahead.
Watchlist
If you missed the news catalyst on RIME 0.00%↑, check out my trade recap here:
It will likely continue to be volatile this week and offer intraday trading opportunities. The theme is active, and as long as volume persists, it remains in play.
Memory
Memory stocks are holding up well relative to the broader tape. Structure remains constructive, but breakout momentum could still be choppy in this environment.
SNDK 0.00%↑ MU 0.00%↑ WDC 0.00%↑ STX 0.00%↑
If QQQ reclaims strength, these likely expand. If tech rolls over again, breakouts may struggle to follow through.
Datacenters
NBIS 0.00%↑ displayed relative strength after reporting earnings. Although they continue to operate at a loss with significant capex, the market reacted positively. That reaction matters more than the headline numbers in the short term.
The broader datacenter group continues to resist selling and is holding support for the most part.
WULF 0.00%↑ APLD 0.00%↑ CRWV 0.00%↑ CIFR 0.00%↑ IREN 0.00%↑
This group remains one of the more structurally intact AI infrastructure themes, but can just remain rangebound while the broader market pulls back.
Fiber optics
The optics group remains in continued uptrends, but no clean entry setups are prevalent in this grind higher.
GLW 0.00%↑ continues to trend constructively.
LUMN 0.00%↑ looks to have undercut recent support and is attempting to rally back. If that reclaim holds, it could offer a tactical long setup.
Markets don’t wait for weekly posts. For those looking to follow the market more actively each day, a daily livestream runs every morning at the market open, offering real-time commentary, screen sharing, trade ideas, and watchlists within the Discord community. Check out the link below: