Rotation, Not Retreat: What Alphabet's 12% Drop Says About the Market

Google is on our watch list, and we have all been waiting for Alphabet to report because it is one of the megacaps and it moves the Nasdaq. The Nasdaq was already struggling, so when the stock fell about 12% after the numbers, my honest reaction was: man, oh man, what a disappointment.

Then I looked at the S&P 500. It lost 0.3%. That's it. If you only glanced at the index, you would have thought it was a boring Thursday.

So where did everybody go?

Not out of the market, they just changed seats. Money moved into health care, financials and real estate, and the version of the S&P 500 where every company counts the same finished up 1.2%. Small caps were up about 1%. Alphabet drops 12% and the index shrugs. That is what owning a broad market buys you.

Look at the last three weeks. Equal weight is up about 3.6% since the Oct 6 high and the Nasdaq 100 is down about 5.8%. Same market, very different experience depending on where you were sitting.

So where are we?

The S&P is a little over 1% below its high and sitting right on its 50-day average, with the long-term trend well underneath us. It has been bouncing between roughly 754 and 779 since August. A close above 779 is a new high. A slip under 760 and that 754 low gets interesting. In between I call it noise.

What I am watching

Honestly, rates. Inflation came in hot, the Fed held but a couple of members wanted to hike, and the 10-year is almost at 5%. The market is not paying up for earnings right now, which is a decent cushion, but if earnings disappoint while it is paying less for them, it gets ugly fast. I like knowing where the exits are, the same reason I read the fire map on the back of the hotel room door.

Amazon reports tonight, so tomorrow's chart may have opinions.

This is also why Maya watches about 50 liquid stocks and ETFs instead of a handful of giants. That is my read, not advice.