AI trading is one of the most important sources of upward leadership for the market, but its technological profile has weakened significantly in recent weeks. The Global X Artificial Intelligence & Technology ETF (AIQ) has seen significant corrections in both absolute and relative terms, creating challenges for the group in the third quarter. AIQ has fallen nearly 19% from last month’s high. The weekly MACD has shifted to a “sell” signal, which is a bearish development for the coming weeks and suggests that the correction is not completely over yet. Weekly stochastics also show downward revisions, further reinforcing the loss of upward momentum since the ETF was extended in June. The composition of AIQ helps explain why this correction is so important to the overall market. Its top holdings include several stocks that have been central to AI trading, such as SK Hynix, Micron, AMD, Apple, and NVIDIA. This gives AIQ meaningful exposure to semiconductors, AI infrastructure, and megacap technologies, making it a useful proxy for broader AI themes. The daily chart suggests that AIQ is expected to stabilize in the near term before the next low develops. The ETF is short-term oversold and is testing support from the daily cloud model, which is a natural area for a pullback. While this should help alleviate some of the near-term downside pressure, it does not cancel out the deterioration in medium-term momentum on the weekly chart. We view the short-term pullback as a break in the correction rather than the start of a new uptrend. The first resistance lies at the 50-day moving average and daily cloud, in the $64-$65 zone. A break below cloud-based support near $57 would officially reverse the uptrend from the March lows and increase near-term downside risk towards secondary support near $54 defined by previous resistance. You can see the same thing on relative charts. After a strong period of outperformance, AIQ collapsed versus SPX, confirming that leadership is moving away from the AI industry. This ratio is oversold in the short term, so a temporary period of relative stability is natural, but the decline in momentum is significant enough to suggest that further underperformance is likely to occur this summer. Although AIQ remains on a long-term upward trend, the significant decline in momentum suggests a trend towards a medium-term correction. Due to the short-term oversold situation, AI stock should stabilize in the short term, but until momentum improves, we will use the strength as an opportunity to reduce exposure. —Katie Stockton with Will Tamplin Get free access to Fairlead Strategies research here. 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