O’Neil Health Care Weekly

XLV gained 42bps last week, outperforming the S&P 500 for a sixth straight week and sending it RS line to another new
high. On an absolute basis, the 50-DMA ($133.79) is acting as logical near-term support with resistance still at ~$141.
We would expect further consolidation around current levels. With an RS line continuing to make new highs, an
overweight sector positioning remains warranted.

Market View

The U.S. market remains in a Downtrend. The S&P 500 traded relatively flat this week, remaining just below primary near-term resistance at its 50-DMA (3,886) and just above support near 3,800. The Nasdaq fell another 1.9% and now is trading only 4% from year-to-date lows. Support is between 10,088 and 10,262, before the Covid pivot of 9,838. Primary near-term resistance remains the 50-DMA (10,930). The earliest a follow-through day can take place is Wednesday on the S&P 500 and Thursday on the Nasdaq (Monday holiday).

O’Neil Health Care Weekly

XLV fell 1.8% last week, outperforming the broader market for a fifth straight week and sending its RS line to a higher
high. On an absolute basis, XLV, like the market, is pulling back, breaking near-term 21-DMA ($137) support which may
act as near-term resistance before ~$141. Support is now the rising 50-DMA ($132.52). With an RS line continuing to
make new highs, an overweight sector positioning remains warranted.

Market View

The U.S. market has been downgraded to Downtrend. The S&P 500 and Nasdaq both closed below 50-DMA (S&P 500: 3,864; Nasdaq: 10,928) support this week. Both are again trading below all key moving averages with multiple levels of resistance just above current prices. The next level of support is 3,806 and 10,262, respectively.

O’Neil Health Care Weekly

XLV rallied for a fourth straight week, gaining 1.9% and now trading just 3% off highs. The sector is set to hit resistance at
$140.82 before all-time highs of $143.42. Should a pullback occur, look for the 21-DMA ($134.94) to act as support. The
relative strength line is nearing highs, warranting an equal to overweight sector positioning.

Market View

The U.S. market remains in a Confirmed Uptrend. The S&P 500 regained its 200-DMA (4,046) this week and is now
consolidating gains above all key moving averages. Support below this level is the rising 21-DMA (3,960) with the next
level of resistance at the September high of 4,119. The Nasdaq is still finding resistance at its 100-DMA (11,503) with the
next level above that at the rolling 200-DMA (12,026). The distribution day count stands at five and three, respectively, with
two days expiring on the S&P 500 and one on the Nasdaq next week.

O’Neil Health Care Weekly

XLV gained 88bps last week but is still facing resistance at the August high of $134.47. The next level above that is
~$137.50. Support remains the flattened 200-DMA ($130.16). Though the relative strength line rallied from oversold levels,
it remains well off highs, warranting an equal to slightly overweight sector positioning. Overall, despite the two-week lag,
this ETF still looks intact on an absolute basis as its one of few trading above all key moving averages.

Market View

The U.S. market remains in a Confirmed Uptrend. The S&P 500 rallied from 100-DMA (3,918) support this week to close just below logical near-term resistance at its rolling 200-DMA (4,057). Resistance above this level is the September high of 4,119. The Nasdaq, which is trading ~30% off highs, held 50-DMA (10,907) support despite still trading below near-term resistance at it 100-DMA (11,510). Resistance above this level is the falling 200-DMA (12,094). The distribution day count stands at six and two, respectively, with two days expiring on the S&P 500 and one on the Nasdaq next week.