Santoli: AI trade nears now-or-never rebound after 35-point slide

Santoli's argument rests on the idea that time separates a restorative rest from unhealthy stagnation, and the past few months of sideways S&P 500 action have done the former in a tactical sense. The constant churn has created short-term washout conditions in semiconductors and other former momentum AI-hardware plays, while cyclical pockets from consumer discretionary to industrials to banks have suffered double-digit setbacks as higher bond yields and elevated oil prices restrain growth expectations.

The intermarket backdrop has scrambled familiar relationships: Treasury yields have stopped moving closely with oil, retreating well off their highs even as crude stays above $100 a barrel, and the S&P 500's former inverse correlation with Treasury yields has loosened. Goldman Sachs' equity desk noted trader exhaustion, with the momentum-factor stock basket moving at least 5% in a day 30 times in 2026, more often than in any full year including 2000, 2009 and 2020.

Against that, Macro Risk Advisors' John Kolovos sees sentiment and positioning approaching a fat pitch for a tactical rebound, though he cautions that improving momentum amid tight financial conditions has historically produced disappointing returns. Santoli's own bigger-picture read stays cautious: he sees late-cycle tremors in narrower leadership, unwillingness to pay up for fast earnings growth, a flattening yield curve and stingier credit markets, and he flags that retail dip-buying has not typically marked important lows.