by Jason Bodner
February 24, 2026
The markets are acting weird. There, I said it.
Most indexes are near all-time highs, but there is a wide dispersion buried within such a statement.
The S&P 500 has logged 33-trading days thus far in 2026. In these seven-weeks of trading, we’ve seen a decline in the NASDAQ and the Russell 2000 index soaring-up, while the SPY (S&P 500 Tracking ETF) is nearly flat in 2027.
Since January 1st, 24% of all outflows were in Software, followed by Internet and Data Services at 9.3%.
Meanwhile, 50% of all inflows since January 1st were split more or less evenly between these sub-sectors:
- United States Banks
- Metal Ore Mining
- Machinery Manufacturing
- Semiconductor Equipment and Services
- Support Activities for Oil and Gas Operations
- Real Estate Investment Trusts (REITs)
- Aerospace and Defense Manufacturing
- Investment Services
- Specialty and Performance Chemicals
- Hospitality Services
- Semiconductor Manufacturing
What’s happening below the surface? First, our Big Money Index (BMI) currently sports a great reading of 67.9%. over the last 25-trading days, 68% of all unusually large trade signals were inflows, a reading well above the 20-year average of 61.8. This means we’re seeing the buyers firmly in control.
In this case, why isn’t the S&P 500 going anywhere – at no better than a 1% year-to-date gain?
If you only read the headlines, you would think artificial intelligence just declared war on every software company in America. This scary story seems to imply AI will replace software. Revenue models will collapse. Entire business lines will disappear – probably before your college kid’s spring break.
Layer in the political narrative and the fear index rises further. President Trump is supposedly losing his base. Commentators forecast a mid-term massacre for Republicans, so risk assets are under pressure.
Capital is rotating into small-caps, materials, energy, staples and utilities.
The media storm is making a relentless argument for safety over growth, and value over technology. But markets follow the money-flows, not the media headlines, and the flows right now are not saying the technology-sector is broken. They are saying some leveraged positions are being unwound.
The recent crypto-currency slide was violent. When crypto-currency leaders Bitcoin and Ethereum crack, leveraged players do not calmly rebalance their portfolios. They scramble for liquidity. And where do they find any liquidity? In the most profitable trades of the last few years: Technology. Software, Crypto-currency and Semiconductors.
These part winners have been sold to raise funds, not because earnings collapsed – and not because guidance imploded – but because margin calls do not care about our long-term strategies.
Look at the data. The Technology Select Sector SPDR ETF (XLK) is seeing extreme outflows. In the past five-years, we have only seen comparable pressures twice, in 2022 and 2025:
The first time was in 2022, with its seven-rate hikes, which created rising borrowing costs and slowing digital demand. The NASDAQ fell more than 35% then. (It’d call -35% a “broad macro reset”).
The second instance was November 2025. Investors doubted AI valuations. The Fed turned hawkish. The government shut-down. Job gains weakened. Even strong earnings were punished. Sentiment cracked.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
What happened next? Technology recovered. Semiconductors ripped to new-highs in January. The stocks labeled “uninvestable” two-months earlier became leaders again. Back then, I said the November correction was a leverage unwind dressed up as a valuation debate. I believe the same thing now.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
Margin debt is at a record-high, sitting near $1.2-trillion according to St. Louis Fed data. When crypto-currency gets hit, brokers call loans. Traders sell what they can, not what they want. Technology has been the largest pool of gains to harvest. So, technology gets harvested.
Meanwhile, fundamentals are moving opposite the fear. Rates are falling, as is inflation. Taxes are likely headed lower. Margins are expanding. Earnings revisions in many tech sub-sectors remain positive.
With 74% of S&P 500 companies reporting their Q4 2025 earnings, 74% beat EPS and 73% beat revenue.
Information Technology has been a major driver of the market’s revenue acceleration since December 31. Its blended revenue growth rate has risen to 20.6% from 17.9%. This looks like strength to me, not decay.
Structurally, demand for computers and semiconductors is not slowing. Hundreds of billions of dollars are being committed to AI infrastructure, spurred by Trump’s Stargate Initiative. Data-center expansion continues. And we rely on technology more than ever and less than tomorrow…
There are roughly 2,000-chips in the average modern vehicle. Appliances, industrial systems, healthcare devices, defense platforms all require advanced silicon.
Memory markets remain ultra-tight. DRAM and SRAM shortages are projected to persist for up to two-years. Does this look like a setup for collapse?
Now, look beneath the surface in software. Since February 1st, I have logged 492-unusual outflow signals in technology stocks. 262 of those were Software companies. The average fundamental score of those companies is 65.75-percent. The average across more than 5,000-stocks I score daily is 42.6%.
The stocks being sold are of materially higher-quality than the average company in the market. More striking, 65% of software names logging outflows carry fundamental scores above 70%. This is not junk being liquidated. This is institutional grade software being thrown out because someone needs cash.
This is where investors confuse liquidity events with thesis changes. They are not the same.
I am not suggesting blind buying. I say…when flows reach extremes in high-quality areas, pay attention.
For broad exposure, XLK makes sense here.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
For more aggressive investors, if you want to focus on software, IGV is the more targeted vehicle.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
If you want more precision, I’d say the opportunity is identifying which of those high-scoring software companies are being punished despite strong fundamentals.
The fear trade in technology is driven by liquidation, not deterioration. And liquidation can end abruptly.
History has a tendency to repeat itself. Those constantly fearing a collapse should realize risk runs both ways – up and down. The risk, especially in software, is to the upside.
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.
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.
All content above represents the opinion of Jason Bodner of Navellier & Associates, Inc.
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A Preliminary First Quarter Scorecard – Despite Some Speed-Bumps
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Don’t Panic, NASDAQ Investors: “The NAZ” Will Rise Again
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A “Tariff-ic” Week for the Stock Market
Sector Spotlight by Jason Bodner
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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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