I love it when bears get caught forgetting that we’re in the middle of a raging bull market.
They overlook one of the most powerful forces in markets: sector rotation.
It’s alive, it’s relentless, and it keeps proving them wrong. And for that we should all be grateful.
If investors weren’t so bad at basic math – or so eager to ignore the history that’s freely available to all of us – we probably wouldn’t be making this much money.
As Charlie Munger put it, “If people weren’t wrong so often, we wouldn’t be so rich.”
One of the greatest contrarian truths ever spoken… and, honestly, one of the most underrated pieces of technical analysis of the last century.
Healthcare Stocks Are Big in America
Folks, this isn’t Canada. We actually have health care stocks here.
And despite the historic drawdowns across the space over the past year, Healthcare still makes up one of the heavier weightings in both the S&P 500 and the Dow Jones Industrial Average.
That tells you how important the sector is, even after the damage.
Take UnitedHealth Group (UNH), for example. It was the single largest component of the Dow heading into Q4 of 2024.
Then it lost more than $350 billion in market value over just nine months – a staggering collapse that knocked it completely out of the Dow’s top 10 holdings.
And it wasn’t long before Warren Buffett and David Tepper disclosed their own buys.
The result? That trade more than doubled in short order.
Bears Are Trapped in Healthcare
Where I come from, we like to double down on what’s working and cut back on what isn’t.
UnitedHealth is a perfect example. We stepped in when everyone else had given up, and the trade doubled right out of the gate. It’s kept climbing since, and we’re thrilled about that, of course.
But, instead of spiking the ball in the end zone, we’re scanning for the next setup in the space.
Take the Healthcare Select Sector SPDR Fund (XLV). It briefly slipped below its 2022 highs, only to rip right back above them.
That false breakdown left the bears trapped underneath former resistance – exactly the kind of failed move that tends to spark fast, powerful moves in the opposite direction.
And, in this case, that direction is up:
Sentiment around Healthcare right now is still in the gutter. That’s why the bears thought they finally had something to celebrate.
Instead, prices are ripping in their faces – hitting new six-month highs on Friday.
Because, at the end of the day, this is what happens in a bull market.
Record Outflows From Healthcare
According to Bank of America, more than $17 billion has poured out of Healthcare this year – the largest outflows on record. And that’s on top of heavy withdrawals the last two years running.
Enough is enough. The bears have overstayed their welcome. Just like we’ve seen across other sectors, it’s only a matter of time before they get steamrolled.
Biotechs are already ripping. We’ve been adding exposure, and it’s working beautifully.
But this isn’t just about the smaller players. Move up the cap scale and you’re talking about some of the biggest companies in America, coiled and ready to run.
We call these setups “Bear Traps.” Some might call them “Bull Hooks.” Either way, the result is the same: bears caught leaning the wrong way, forced to buy back at higher prices.
The truth is simple. The bears forgot we’re in a bull market. And now they’re paying for it – the way they always do.
I’m here for every bit of it. I’ll gladly profit off their mistakes.
How about you? Are you player-hating? Or participating?
Stay sharp,
JC Parets, CMT
Founder, TrendLabs