by Jason Bodner
February 18, 2026
So far this year, last year’s leading indexes (NASDAQ and S&P 500) are trailing the past laggards, the Dow and Russell 2000. The S&P is flat and the NASDAQ is down, while the Dow and Russell 2000 are flying-high.We are watching some long-time assumptions getting repriced right now. This has happened before.
In 1869, the completion of the Transcontinental Railroad did not just connect America’s two-coasts. It instantly repriced distance. What once took months now took days. Fortunes were made and lost, not because the world ended, but because the nation’s economic assumptions changed drastically.
The headlines say something like, “AI is breaking software.” Some commentators are certain the technology-bubble has burst. One story making the rounds says tools like Anthropic’s Claude will render traditional software companies obsolete. Even some of the “Magnificent 7” icons are being punished.
But when I look at the data, I do not see any collapse. I see some massive rotation, plus forced liquidation.
Let’s start with the Big Money Index (BMI). After rising at the end of 2025, it stalled between roughly 68 and 72. It currently sits at 69.3, which is still outstanding. This is not what a broad market top looks like.
This looks more like “digestion.” Under the surface, as I stated above, leadership has shifted. The S&P 500 has struggled and the NASDAQ is flat, while past laggards (the Dow and Russell 2000) are flying-high.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
Inflows still significantly outnumber outflows, but not at the pace we saw last-year, when equity markets were flying-high. Since February 1, 62% of all Money Flows signals have been inflows vs. 38% outflows.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
ETFs, however, show the broader uptrend remains intact, with most ETFs seeing inflows. The notable exceptions are the crypto-currency ETFs, which have seen outflows.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
Volumes are elevated above the 20-year average and trending higher, signaling repositioning, not panic.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
At the sector level, most sectors see inflows, with the exception of Technology and Health Care.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
When we break sectors down further, by subsector, demand is broad across banks, manufacturing, REITs, oil and gas, chemicals, utilities, and other cyclical and value areas. Investors are chasing cyclicals and value. Even within Technology, there have been inflows into semiconductors.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
This damage appears when we examine outflows. Technology accounted for 32% of all outflows last week, and 97% of software signals since February 1st have been outflows. 92% of internet and data-services signals have been outflows, and software alone accounts for 22% of all outflow signals in this time span.
This seems to be the very definition of “concentrated pain.”
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
A sick market shows investors fleeing from risk, but this is a reallocation of risk, and also an opportunity.
In one day, February 3rd, technology stocks logged 103-outflows. In 13-years of data, there have only been 13-trading days with more technology outflows. Statistically, this represents a 99.6 percentile selling event.
Let’s zoom in even further into the data. IGV, the iShares Expanded Technology-Software Sector ETF, just registered an RSI of 14.16. In 25-years, it has only been this oversold six-times. Each of those six-instances was followed by positive forward returns at one, three, and six-months.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
Margin debt sits at record levels. At the same time, record cash balances of $1.2-trillion are parked in money market funds, earning roughly 3.5%. This trade has been straightforward. Investors pledge cash as collateral. They borrow at 5% to 7%, and try to out-perform in a strong market.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
Hedge funds amplify this gross exposure. A long-short fund might run 200% leverage, or 2x leverage, which can work when volatility is low, but when volatility spikes, it amplifies losses.
Bitcoin has accelerated this process. Crypto-currency margin is not regulated like equity margin, so crypto-currency liquidations can cascade quickly. When Bitcoin falls hard, leveraged players are forced to sell. They sell what other investments they can. The most liquid winners with the best gains become a liquidity source.
Software and semiconductors have been prime candidates, forcing selling creates price damage. The media then searches for a story-line. Right now, the prevailing story-line says AI will replace traditional software. Software companies are yesterday’s news, but I find this reasoning thin. AI companies are software companies. If new entrants dominate and eventually go public, they will become part of the same ecosystem. If incumbents adapt, they retain leadership. Most large software-firms are already integrating AI deeply into their offerings. Microsoft is not ignoring AI. It is investing heavily in it.
The forecast of AI eliminating software is like saying electricity will eliminate industry. No, electricity enhanced and reshaped industry, rewarding those who adapted. This is not a “death of technology.”
Cyclicals and value stocks are catching bids. Banks, industrials, energy, materials, REITs, and utilities see steady inflows. Semiconductors are still attracting capital. The broader market is rotating, not collapsing.
When 97% of signals in software are outflows and an ETF like IGV is at a generational RSI extreme, risk reward begins to shift. Look at the forward returns in similar events:
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
This does not mean selling cannot persist for a while longer. It could, but deleveraging can overshoot and air-pockets can get more violent. Asymmetry tends to emerge when software selling reaches epic levels.
I have been adding software exposure recently, not blindly, but selectively. With a multi-year lens. I view IGV as being unfairly punished by a narrative which seems to me convenient, but shallow. I believe high quality stalwarts fall due to forced flows. Stocks like MSFT represent opportunity, not obsolescence.
The broader uptrend remains intact. Inflows still outnumber outflows. Sector rotation is uncomfortable but normal. Extreme concentration of outflows in one subsector is not a sign of a prolonged bear-market.
Distance was repriced after 1869. Assumptions were shattered. Those who understood the structural shift prospered. Those who reacted emotionally to volatility often did not. Today, the impediment is forced selling and fear around AI disruption, and this may be precisely where the opportunity lies.
“You have power over your mind, not outside events. Realize this, and you will find strength.”
— Marcus Aurelius
All content above represents the opinion of Jason Bodner of Navellier & Associates, Inc.
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Jason Bodner
MARKETMAIL EDITOR FOR SECTOR SPOTLIGHT
Jason Bodner writes Sector Spotlight in the weekly Marketmail publication and has authored several white papers for the company. He is also Co-Founder of Macro Analytics for Professionals which produces proprietary equity accumulation and distribution research for its clients. Previously, Mr. Bodner served as Director of European Equity Derivatives for Cantor Fitzgerald Europe in London, then moved to the role of Head of Equity Derivatives North America for the same company in New York. He also served as S.V.P. Equity Derivatives for Jefferies, LLC. He received a B.S. in business administration in 1996, with honors, from Skidmore College as a member of the Periclean Honors Society. All content of “Sector Spotlight” represents the opinion of Jason Bodner
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