1997 Volvo 960 960 with blinking arrow and trans modes

So I have a 960 wagon that drives great. However the CEL is on and the up arrow is blinking as well as the lights cycling through the transmission modes (W/S/E). I replaced the gear selection sensor (PNP switch) and reset everything and didn't get a mile before the light came back on.

The car shifts file and has bright red fluid. The code that is returned on the OBDII is P0740.

Any help is much appreciated as emission are due in a week.

Thanks