Beaten-down software names had a strong day. The S&P 500 ETF and the chip complex didn't. The software bid is happening inside a board that hasn't promoted software: a software rotation inside a short-term downtrend, not an all-clear.
AB Editor's Cut · Tuesday, October 20, 2026 · The Editor and the AB Desk · intraday prices about 2:49 PM ET Oct 20 unless marked
The publisher's view
The publisher's view, not a forecast. In the publisher's view, today's tech weakness looks more like a short-term shakeout than a break in the market's structure. Year-end has historically leaned positive (the 'Santa Claus rally', strictly the last five trading days of December and the first two of January), but that's a seasonal tendency, not a certainty. The publisher is watching beaten-down names well off their highs to see whether today's bounce holds. Against that view, the hazard read today is still high, and the rotation board hasn't promoted software.
Today's evidence was software. A group of software names 23–60% below their 52-week highs rose 3–7% by 2:49 PM ET, while the software ETF gained about 1% and the S&P 500 ETF and the chip ETFs were roughly flat. That's a software rotation, money moving within tech from semiconductors into application software, and not a short-covering move: the hardest-hit AI-infrastructure names barely moved. Oracle was up only about 1.4%.
The observation, and how it gets tested
- What we're observing: software names far below their highs are gaining while the broad tape and chips are roughly flat. A short-term shakeout is one reading of that, and the seasonal year-end window is still ahead, a tendency, not a certainty.
- What the market action suggests: prices are firming in a few names, but volume across the group doesn't confirm it yet. We can't see who is buying, so this is a read of price and volume, not of flows.
- Volume: at about 3:02 PM ET, on a pace-adjusted 20-session basis (Yahoo), only monday.com (1.30×) and Figma (1.31×) traded above average, and both only borderline. HubSpot, MongoDB, Intuit, Oracle and the software ETF were at 0.3–0.6×, so the bounce is thin overall.
- What would support it: a completed close by the S&P 500 ETF back over 769.60, with the chip complex joining software rather than lagging it.
- What would count against it: the S&P 500 ETF failing to reclaim 769.60 on a completed close, or software's lead fading while the board keeps its energy and defensive tilt.
- On the calendar: this week's big-tech earnings, and the FOMC decision on Oct 28 at 2:00 PM ET.
Rotation first
As of 2:46 PM ET Oct 20, the rotation board still leans toward energy and defensives. Leaders are energy and resource bellwethers, plus one payments name and one large pharma, all near 52-week highs. Money is rotating in to defensive staples, telecom, home improvement, restaurants, biotech, banks and select cyclicals. The laggards are AI power and semiconductor equipment, uranium, mortgage REITs, aerospace and defense, and space. Brazil and the bitcoin funds are flagged as rotation-out risk.
On software, the board is mixed. One beaten-down software name is rotating in, while two enterprise-software leaders are flagged at rotation-out risk on fading relative momentum and multiple-compression risk. The software ETF isn't on the board. So the software bid is happening inside a board that hasn't promoted software: rotation among software names, not a board-wide software lead. The full named board, with scores, is for Elite readers.
What the tape did
At 2:39 PM ET the S&P 500 ETF was about 768.7, up 0.3%. That's just under the desk's 769.60 line, the line the desk is watching for a completed close above, and it had been under it since about 2:15 PM ET. Around 2:49 PM ET the Nasdaq-100 ETF was roughly flat at 718.07, the semiconductor ETF was flat at 548.40, and the software ETF was up about 1.0%.
Under that flat surface, a group of software names far below their highs moved hard (about 2:49 PM ET):
- monday.com: +7.4%, 52% below its 52-week high. It launched a voice-AI sales tool, Harmony, on Oct 19 (Investing.com, 10:16 AM ET).
- HubSpot: +6.9%, 50% below its high. Earlier this month it announced a restructuring including a 7% headcount cut and reaffirmed guidance (company 8-K, Oct 6; TradingKey, Oct 20).
- Figma: +6.7%, 60% below its high. Its Agent and Weave tools went live last week. On Oct 14, Stifel lowered its price target to $22 from $25 and kept a Hold rating (Benzinga); that's the broker's view, not AB's.
- MongoDB: +4.6%, 23% below its high.
- Intuit: +3.1%, 51% below its high.
A few chip and storage names joined in (about 2:49 PM ET): ON Semiconductor (+3.9%, 44% below its high), NXP (+3.5%, 30% below, ahead of Oct 27 earnings, per Quiver Quantitative) and Western Digital (+3.4%).
The catalyst is a theme, not one headline. StockStory, citing CNBC, reports money moving out of semiconductors and into software (about 12:55 PM ET). The fear that AI will make software makers obsolete is fading, and worries are growing about a slowdown in AI-infrastructure spending.
What it isn't: Oracle is a caution
Oracle is the name people point to, but it's a caution, not the lead. It's still about 54% below its 52-week high and was up only about 1.4% at 2:49 PM ET. The hardest-hit AI-infrastructure names aren't bouncing either: CoreWeave was +1.4%, and Nvidia, Micron and the chip-equipment group were flat to down (about 2:49 PM ET). A broad bounce across beaten-down tech would normally include them. Today it didn't.
Then the hazard reads
TRH: drawdown risk high, P* 49% (live intraday reading, 2:52 PM ET Oct 20). That's a hazard read, not a forecast. It's down from severe, 71%, at the Oct 16 close (4 PM ET).
SHC: incipient since Oct 6, with no drawdown touch (2:52 PM ET Oct 20).
Three-axis: market value intact, TEMPORARY DIP, low conviction (desk text, 2:30 PM ET Oct 20).
Taken together, the hazard read has eased from severe to high but is still high, and the macro picture fits the desk's view that tech weakness is a short-term downtrend, not a break in the market's structure. Rotation into hard-hit software is what that phase can look like. A stronger signal would be a completed close for the S&P 500 ETF back over the desk's 769.60 line, with the chip complex joining in. Until then, a handful of names far off their highs catching a strong day is a sign to watch, not proof the downtrend is over.
What we're watching
- Whether software's lead holds into Wednesday, whether the board promotes it, and whether chips join or keep lagging.
- Big-tech earnings this week, starting Wednesday, and the FOMC decision on Oct 28 at 2:00 PM ET.
- A completed close by the S&P 500 ETF over the desk's 769.60 line.
This is research, not a recommendation. Readers are not told to buy, sell or take a position.
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Disclosure: the illustrative AB Portfolio model book holds semiconductor sector funds, which give it indirect exposure to some chip names mentioned here. None of the companies named is a direct holding.