Update: Bulls Always Think They Can Hide

ZH: Money Always Goes Somewhere

Takeaway: These 11 names have soaked up just over three quarters (3.39 points, 77 percent) of the index weighting lost by the 7 US Big Tech names this year. Energy is still just 5.2 percent of the S&P 500, less than either Apple (7.0 pct) or Microsoft (5.3 pct). Health Care is 15.0 percent of the index currently, below the 16.0 percent that represents the upper end of its historical band. We believe both sectors can continue to take index weighting “share” from Tech and, by extension, outperform going forward.

Final thought: The only investment positive behind Big Tech’s ongoing declines (such as Amazon after hours tonight) is that they reduce these names’ impact on future S&P 500 returns. That has two benefits. First, it gives other stocks and sectors a better chance to affect overall index performance. Second, it makes the S&P 500 less leveraged to interest rates since it reduces the index’s price/earnings multiple. Bottom line: the S&P 500 doesn’t need Tech stocks to rally to show reasonable gains between now and year end. It does, however, need them to stop falling.

This is a good article, but I don't like the short-term conclusion. Bear markets are driven by money leaving the market, not by rotation. Rotation can cause downturns and corrections, but they aren't going to cause bear markets. In 2000, the consumer staples and utilities peaked in November and December. Here is how Merck looked from its IPP until 2000 top and from its IPO until now. Does that look like the start of a new bull market? It looks like the same chart to me. Merck topped on November 30, 2000. I call this bargaining stage fro bulls where they think there is somewhere better to put their money in the market, instead of accepting their best move is probably to get out of the market. They are retreating into safe areas and coming up with the well-worn talking points about stable, consistent earnings that will hold up in a recession. Or how the stocks are relatively cheap. All can be true, but bear markets are a psychological event that leave no sectors untouched, maybe some subindustries and always a few stocks. Big managers can't buy the little stocks that are best positioned to outperform in a bear market though. Almost everyone in the financial industry has a vested interest in keeping clients invested in liquid, large-cap stocks. Most are long-only and foribidden from taking short positions. Either soon, or early in 2023, the redemptions will begin.

Update: I took another look: the monthly candles for October in both years are very similar.