RJ Hamster
Why a Secret AI Meeting Sent Bank Stocks Tumbling
Why a Secret AI Meeting Sent Bank Stocks Tumbling
BY MICHAEL SALVATORE, EDITOR, TRADESMITH DAILY
In This Digest:
- This terrifying new AI model is shaking financial stocks
- Financials are one of the weakest sectors in the market
- Why AI crushed cybersecurity stocks – and which ones are still a buy
The market sent mixed messages yesterday…
Yesterday, the U.S. Navy began enforcing what President Trump called a “complete blockade” of all ships entering or leaving Iranian ports.
The move came after the Islamabad peace talks collapsed over the weekend.
Brent crude, the international benchmark, rose back above $100 a barrel. But despite the rising oil price, the S&P 500 and the tech-heavy Nasdaq 100 jumped nearly 1%.
We can’t say what will happen with Iran or how markets will react. Right now, our short-term signals are still tilted bearish, while our long-term measures are more optimistic.
And one sector looks especially vulnerable on both measures, which we’ll get into shortly.
Because while the world watches missiles and oil tankers, something happened last week in Washington that deserves far more attention…
That’s due to an urgent closed-door meeting in D.C.…
It took place last Tuesday at Treasury headquarters in response to a terrifyingly powerful new AI model from Anthropic called Mythos.
In attendance were the CEOs of Citigroup, Morgan Stanley, Bank of America, Wells Fargo, and Goldman Sachs.
Mythos is the most advanced AI system Anthropic has built. In testing, it discovered thousands of previously unknown security flaws in virtually every major operating system and web browser. Human engineers had missed these flaws for decades – the oldest dating back 27 years.
And Mythos didn’t just find the flaws. It wrote working code to exploit them – getting it right on the first try more than 83% of the time.
A hacker armed with this kind of tool could penetrate any software-based system through weaknesses nobody even knew existed – including the financial system.
The Treasury is reportedly looking to access Mythos to test for vulnerabilities in the banking system. Ideally, they’ll act faster than any nefarious hackers.
But that’s just the start of the problems facing financials stocks…
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Financials are the market’s weakest link…
It’s not just Mythos. Financials have been under pressure all year from three different angles.
- First, AI disruption fears have hammered banks, brokerages, and fintech firms. As new AI tools for financial planning and tax guidance emerge, they threaten to automate work that used to require expensive human expertise.
- Plus, rising stress in private credit markets has added another layer of concern. With stubborn interest rates and credit portfolios loaded with software companies – many of which are losing value as AI disrupts their businesses – investors are questioning the health of bank loan books.
It doesn’t help that firms like Blackstone and BlackRock have been restricting investor withdrawals from their private credit funds.
Those are three headwinds converging on Financials right now. And our data confirms the damage.
Take a look at each of the major market sectors by their Health status:
Health is a core indicator for our firm. Short-Term Health measures a stock’s typical trading range and detects abnormal shifts that signal changes in momentum. Long-Term Health looks at a stock’s average historical volatility and determines buy or sell signals.
On either signal, think of it like a traffic light. Green means buy, Yellow means caution, and Red means sell.
As you can see, not only is the Financials sector Red on both Short- and Long-Term Health, it has been for months.
What you’ll also notice is that Financials has the highest number of Red Zone stocks in the market:
Almost three-fourths of the stocks in the Financial Select Sector SPDR Fund ETF (XLF) are in the Red. A mere 10.5% are in Green.
But even in a sector this beaten down, a small group of stocks are still in healthy uptrends. And many of them have something in common: They’re the financial firms least exposed to the AI disruption story.
Yesterday two major bank stocks, Bank of NY Mellon (BK) and Citigroup (C), flashed Short-Term Health Green. That means they’re the freshest buys in the Financials sector – its leaders amid the broader recovery rally we’re in.
But over the past few months, you can see that insurers like Allstate (ALL), Travelers (TRV), and Chubb (CB) have held steadfastly green.
These companies collect premiums upfront and invest that cash while waiting for claims. They benefit from higher interest rates and have limited exposure to the AI disruption hitting banks and fintech.
Exchanges like CME Group (CME) and Cboe Global Markets (CBOE), also in green, profit from rising trading volumes. And in volatile markets like 2026, volume surges.
These are the financial stocks that don’t need a bull market to work. They need volatility and pricing power – and they’ve got both.
If you own financial stocks and subscribe to our Health indicator, check their Short-Term Health status. Anything in a Long-Term Red Zone is a clear sell. Yellow Zone stocks deserve close monitoring.
If you’re not subscribed, I’d urge you to stay tuned here. Each day in TradeSmith Daily, we report the biggest themes we see in our data to help our subscribers stay ahead of the crowd.
Cybersecurity stocks are getting hit from both sides…
The Mythos announcement wasn’t the only blow Anthropic delivered last week.
On Tuesday, the company also launched Claude Managed Agents – a cloud service that lets businesses build and deploy AI agents that can autonomously perform complex tasks.
Think of agents as autonomous AI workers that can scan code, run workflows, and handle security tasks with minimal human supervision.
If AI can do security scanning and threat response autonomously, the companies that sell those services start to look less essential.
And the news hit cybersecurity stocks hard. The First Trust NASDAQ Cybersecurity ETF (CIBR) fell about 4% on the day.
But look at CIBR’s Short-Term Health Red signal on December 1, 2025 – well ahead of the AI disruption story. Since then, the ETF has been in persistent decline, down more than 13%. Take a look:
Now let’s look at the top five holdings in CIBR by weight and see where they stand on Short- and Long-Term Health:
The top holding, Broadcom (AVGO) at 9.47% of the fund, tells a split story. Its Short-Term Health has been Red for more than two months – but its Long-Term Health just flipped to a Green Zone in the past week. That tells us AVGO is well off its recent lows despite near-term weakness.
And Broadcom is more of a semiconductor and networking play than a pure cybersecurity company – so it’s benefiting from AI buildout demand more than it’s threatened by it.
Palo Alto Networks (PANW) at 8.52% and CrowdStrike (CRWD) at 8.3% are both in Short- and Long-Term Health Red Zones – PANW for more than four months on short-term and more than two months on long-term. CRWD has been in a Short-Term Red for more than three months. Together, they make up nearly 17% of the entire ETF.
When the two biggest pure-play cybersecurity names are both firmly in the Red, it drags the whole fund down.
Cisco (CSCO) is the healthiest stock on the list – in a Short-Term Green Zone for more than two months and a Long-Term Green Zone for more than a week. It’s more of a networking and infrastructure play than a cybersecurity pure play, which helps explain why it’s holding up.
And Fortinet (FTNT) is showing the earliest signs of a turn. It’s been in a Long-Term Red Zone for more than eight months. But its Short-Term Health just moved to Yellow four days ago – the first non-Red reading in months. It’s worth watching but isn’t a buy yet.
Cybersecurity stocks look rough at first glance. But some companies within the sector are showing healthy price action. You can explore the full CIBR holdings page in TradeSmith Finance to see the Health status of every stock in the fund – just search for the ticker and click through to the holdings view.
Tomorrow, we’re opening up our most advanced trading software to you…
We’ve been covering what happens when you apply AI to a problem humans have been struggling with for decades… and the results blow them away.
Anthropic’s Mythos found security flaws that survived 27 years of human review. It wrote working exploits on the first try 83% of the time.
It did in weeks what armies of security researchers couldn’t do in decades.
Now ask yourself: What happens when you point that same kind of pattern recognition at 70 years of stock market data?
That’s the question our team set out to answer more than a year ago.
And the answer is now a piece of software that our Platinum members have been beta-testing for months.
It evaluates 2.09 million potential trades every single day across 2,467 stocks.
It runs each one through 847 individual calculations – looking for obscure, repeatable patterns buried in decades of price data that point to predictable moves.
These are patterns a human trader would never find. Not because they’re not smart enough… but because the data is too vast and the patterns too subtle.
When the right combination of factors aligns, the system flags it as a high-probability trade setup – complete with the historical win rate, average gain, hold time, and risk profile.
And tomorrow, Wednesday, April 15, we’re opening up a beta version of this revolutionary new tool so you can try it for yourself on hundreds of stocks.
If you want to be among the first to try the most advanced piece of trading software we’ve ever built, make sure you’re reading the Dailytomorrow.
I’ll have the link that will let you test drive it. And for the full story, make sure you tune in to our launch event on April 22.
To building wealth beyond measure,
Michael Salvatore
Editor, TradeSmith Daily
