Confused Market Struggles With AI Scenario No One Saw Coming

Market breadth is about 65% positive, and the Russell 2000  (IWM)  small-cap index is leading with a gain of more than 1%. However, it is very choppy, and the hot pockets of speculative momentum have dried up. Nvidia  (NVDA)  and semiconductors  (SMH)  are lagging while Alphabet  (GOOGL)  and biotechnology are leading.

Overall, it feels confused as market participants try to sort out what is going to happen in the AI sector. What is most interesting about this action is that no one saw this particular scenario unfolding. There was endless talk about bubbles and valuation, but no one discussed the possibility that Google could be a significant competitive threat to Nvidia. If Google can do it, it is very likely that someone else will emerge as well, which would throw the entire sector into disarray. There is nothing like intense competition to tighten profit margins and put more focus on valuation.

The best action in this market is outside of technology. Biotechnology has been trending very nicely, but it receives almost no media attention. The Biotech ETF  (IBB)  still has not surpassed its 2021 highs, which suggests that there is more upside potential.

I’m not feeling particularly bullish or bearish right now, and I’m not seeing many charts that I want to look up right now. I’m hoping we see some more volatility on Wednesday and during the half-day session on Friday, but if it isn’t there, then I’ll focus on something else and not force it.

Some of the better charts I see include Liquidia (LQDA) , NerdWallet (NRDS) , Rhythm Pharmaceuticals (RYTM) , and Nektar (NKTR) . I’ll keep looking, but the market is looking confused, and that makes it difficult.

At the time of publication, Rev Shark was long NVDA, GOOGL and LQDA.