XLV lost 65 bps last week but held up much better than the broader market. Its RS line is now rising over the
last two weeks, with alpha of over 3% vs the S&P 500.
Medical Tools, Devices and Services have come back under accumulation, while Managed Care, Hospitals,
and Outpatient Care have come under distribution. We recommend buying high quality growth ideas from
improving industry groups that are breaking out from constructive consolidation into new highs
The U.S. market remains in a Confirmed Uptrend. The S&P 500 pulled back to close slightly below its 50-DMA
as market breadth narrowed, while the Nasdaq traded relatively flat for the week, holding just below all-time
high resistance of 14,211. Price support below the 50-DMA on the S&P 500 is 4,056, which may coincide with
the rising 100-DMA. The distribution day count stands at six and five, respectively, with three expiring on the S&P
500 and one on the Nasdaq next week.
XLV rebounded sharply last week following BIIB’s FDA approval. The sector jumped back into new highs led by Biotech,
however, is still flat versus the S&P 500 over the last two weeks.
The sector has recently compressed similar to the broader market, with value-oriented groups pulling back, while growth oriented groups rally. Last week, there was notable strength in longer-term lagging groups (Biotech, Pharma, Equipment)and weakness in leading groups (Managed Care, Hospitals).
Despite last week’s action, value-oriented ideas are not broken, they are basing. They may simply need time before they
come back under accumulation again. Growth-oriented ideas are setting up, but the majority have yet to breakout and
begin a new trend. Continue to focus on the technical setups we highlight as we believe these ideas have the ability to
trend into higher highs should the market and sector remain intact
The U.S. market has shifted back to a Confirmed Uptrend. The S&P 500 is again trading at all-time highs, while
the Nasdaq is trading within 1% of all-time resistance at 14,211. Near-term support remains the rising 21- and
50-DMA, respectively. The distribution day count stands at six and three, respectively, with two expiring on the
S&P 500 and one on the Nasdaq next week. Each index has only added one distribution day in the last three
weeks.
Key points from this report:
XLV has lost more than 3% in alpha versus the S&P 500 over the last two weeks. Weakness last week can be largely attributed to Abbott’s gap lower on Monday and how newly anticipated COVID-19 testing weakness will negatively impact peers over the remaining year.
Though Hospitals continue to be the leading group within Health Care, we did see notable strength in select Biotech and Medical Technology ideas to close last week. The majority of ideas remain stuck within consolidation, so the overall recommendation is to be patient. With that said, keep a close eye on our highlighted early technical setups as they could lead to breakouts should the broader market push out of current rangebound trade.
The U.S. market remains in an Uptrend Under Pressure. The S&P 500 and Nasdaq traded at the low end of a relatively tight range this week before pushing back to the upper end of that range Friday. We will shift the market back to Confirmed Uptrend should the S&P 500 clear back above all-time high resistance at 4,238 next week. Near-term support remains the 21- and 50-DMA, respectively. The distribution day count stands at seven and four, respectively, with one day expiring on each next week.
Key points from this report:
XLV’s RS line (vs S&P 500) declined last week as the majority of large-cap Health Care ideas consolidated
gains. The ETF is still holding near-term support along its 21-DMA.
The U.S. market remains in an Uptrend Under Pressure. The S&P 500 and Nasdaq have regained their 21-
DMA (4,168) and 50-DMA (13,612), respectively, and continue to consolidate in a constructive fashion above
support. The distribution day count stands at eight and four, respectively, with one day expiring on each index
next week.
