Market View

The U.S. market status was shifted to a Rally Attempt from a Downtrend on August 23.  The S&P 500 and Nasdaq rose 0.8% and 2.3% for the week. Indices finished with a strong Friday, but still closed in the bottom half of the weekly range. Both were rejected in an attempt to retake and hold above 21/50-DMAs. Primary near-term resistance is again the 21-DMA (S&P 500: 4,440; Nasdaq: 13,667) and then the 50-DMA (S&P 500: 4,460, Nasdaq: 13,811). Still, the attempted rally will remain intact as long as recent lows (S&P 500: 4,335; Nasdaq: 13,161) are not undercut. Friday marked Day six of the rally attempt, with a follow-through day needed to upgrade the status back to a Confirmed Uptrend.

O’Neil Health Care Weekly

XLV declined 158bps last week and is now testing immediate support at its 50-DMA and 200-DMA (~$132.50).
Resistance is around current levels of ~$135.81 followed by $136.85. Its RS line has started to rise, warranting an equalto- overweight sector positioning. Though XLV has held up better than the broader market over the last few weeks,
relative performance is tied to only a handful of larger cap Pharma companies as only three Health Care industry groups
are ranked in the top 40 of 197 O’Neil groups. Remain patient, looking for ideas that are trading at logical levels of price or
moving average support following better-than-expected earnings. There remain few ideas in position to buy.

Market View

The U.S. market status remains in a Downtrend. Indices are trading below their respective 50-DMAs after declining
more than 2% each. The S&P 500 and Nasdaq are testing price support near ~ 4,328 and ~13,334 respectively followed
by their rising 100-DMA (4,297, 10,071).

O’Neil Health Care Weekly

XLV rose 247bps last week after finding support from its 200-DMA ($132.42). Immediate resistance is around current levels of ~$135.81 followed by $136.84. Its RS line has made a higher high, warranting an equal to overweight sector positioning. The rise in relative strength is largely due to a select few megacaps driving performance including Novo and Lilly. The news and subsequent rally in Pharma has also created cross currents inside the sector as Medical Products sold off hard with multiple ideas breaking lower. There remains a shift towards defensive areas of the sector as the broader market is still Under Pressure.

O’Neil Health Care Weekly

XLV declined 206bps last week and is now testing support at its 200-DMA ($132.20), with the next level below at its 50- DMA ($131.49). Its RS line is consolidating near lows, warranting an under-to-equal weight sector positioning. Overall, Health Care continues to lag despite a pullback in the broader tape with few ideas in position to buy. Remain patient, looking for ideas rallying from levels of logical support or gapping up on their right sides post print. 100+ Health Care ideas over $1B in market cap are still reporting earnings this week including HALO, HAE, HSIC, HZNP, MASI, NVO, PODD, SWAV, ZTS.

Market View

The U.S. market status has been moved to an Uptrend Under Pressure. Indices pulled back sharply this week with
the S&P 500 and Nasdaq declining 2.2% and 2.8% respectively. Indices breached their respective 21-DMA for the first
time since early May with the next level of support at their rising 50-DMA (4,407/13,673). The distribution day count stands
at six and four, respectively, with three days expiring on the S&P 500 and one on the Nasdaq next week.

O’Neil Health Care Weekly

XLV declined 77bps last week and is testing support at its 10-DMA ($134.46). Next support is at its 21-DMA ($133.21). Its RS line is consolidating near lows, warranting an under- to- equal weight sector positioning. The majority of Health Care ideas have pulled back despite beat and raise quarters. Over the last two weeks, 55 Health Care companies over $1B in market cap have reported. 47 beat consensus EPS, 44 beat consensus revenue, and 41 beat both. Despite 80% beating both, only 19 (43%) of those had a positive response. We have highlighted only one idea this week as 100+ Health Care ideas over $1B in market cap are reporting earnings including EXAS, IDXX, INSP, IQV, ITCI, PGNY, SEM, THC, TMDX and UTHR.

Market View

The U.S. market status remains in a Confirmed Uptrend. S&P 500 and Nasdaq rose 1% and 2% for the week, including a gap-up and close higher on Friday. The S&P 500 quickly retook its 10-DMA (4,552) after trading below on Thursday, and is ~2% above its 21-DMA (4,498). Potential resistance is just over 1% above at March 2022 highs (4,637). The Nasdaq traded below its 10-DMA (14,175) for five days before retaking the level on Friday. It is 2.4% above the 21-DMA (13,976). Potential resistance includes the highs from the prior week (14,447) and then March 2022 highs (14,647). The distribution day count stands at four and three, respectively, after one day expired on each index after Friday’s close.

O’Neil Health Care Weekly

XLV rose 340bps last week, outperforming the broader market and breaking above April high resistance at $135.81. The next level is $137.05, followed by the December high of $141.77. Given the move, we recommend shifting sector weight positioning to equal from underweight, however, we would not move to overweight until we see the RS line make a higher high. This move higher, similar to April, is being driven mostly by large cap ideas UNH and JNJ which have rallied strongly post print resulting in related ideas moving higher in sympathy. Thus far, earnings have been positive with Managed care names rallying on back of ELV/UNH, Medical Devices moving up on ABT, and Tools (DHR, TMO) rallying after Sartorius (SRT3X.DE) stated they are seeing some improvement in orders despite a poor quarter. We have highlighted only two ideas this week as 58 Health Care ideas over $1B in market cap are reporting earnings including ALGN, BSX, DHR, DXCM, EW, HCA, ICLR, TMO and WST.