Recently, every time the market has crept into ‘extreme fear,’ it has backed off quickly—like pulling your hand back after touching a hot stove.

However, Energy (XLE) took the biggest beating yesterday, but Technology (XLK) weighed more heavily on the market.

The VanEck Vectors Semiconductor ETF (SMH) was on the verge of breaking out but got destroyed. The volume spike (green bar) tells the story.

Capping sales of Artificial Intelligence (AI) chips from Advanced Micro Devices (AMD) and Nvidia (NVDA) would undoubtedly hurt, but these developments aren’t nearly enough to derail the value proposition. If there were issues or signs of organic demand destruction in AI, that would be a different story. The six-month chart underscores that ASML Holding (ASML) differs from NVDA, or the broad chip sector, so yesterday’s hit should have been short-lived.

If the chart comparisons didn’t convince you, look at this great graphic from Zeevy Investing. It points to red flags, including revenue growth for ASML. It's not in the same league as those in the AI chip space and other niches of the semiconductor complex.

Don’t Look Now

Small caps are building up a head of momentum that’s largely stealthy now and countering the trend of more unprofitable companies.

I think some of these moves are based on Donald Trump’s improving poll numbers, but the index closed at a double top, so this is a major upside test.

Today’s Session

More positive reaction to bank earnings after Morgan Stanely (MS) knocked the cover off.

Meanwhile, everyone is piling into Consumer Cyclicals (XLY) as bond yields remain elevated. The Street is convinced there will be a soft landing.

Technology is looking to bounce, but there is still some anxiety over that ASML Holding N.V. (ASML) bombshell.