O’Neil Health Care Weekly

XLV declined 5.55% last week, marking its worst weekly decline since 2020. The index breached all key moving averages including
its 200-DMA ($147.57). Next support is at $140.68, followed by $138.21. Its RS line continues to make new lows, warranting an
underweight sector positioning. Despite the sector again being oversold, we expect choppy trendless action over the next few weeks
given last week’s break lower and little to no ideas setup technically to buy.

Market View

The U.S. market remains in a Confirmed Uptrend. Indices pulled back after last week’s strong election gains. The S&P 500 declined ~2% and is testing 21-DMA (5,871) support, while the Nasdaq fell ~3% and closed below its 21-DMA (18,748). The next level of support is at the rising 50-DMA (5,772, 18,264), which is ~2% lower. The distribution day count stands at six and two, respectively. with one day expiring on each index after the close on Monday.

O’Neil Health Care Weekly

XLV gained 165 bps last week after rallying from 200-DMA ($147.43) support. Immediate resistance is at its 100-DMA ($150.97),
followed by its 50-DMA ($152.58). Though an oversold absolute rally is likely to continue, we still recommend an underweight sector
positioning given the Relative Strength (RS) line remains at its lowest levels since 2011.

Market View

The U.S. market remains in a Confirmed Uptrend. The S&P 500 and the Nasdaq advanced to all-time highs, gaining
4.7% and 5.7% bps, respectively, for the week. The S&P 500 made new highs for the first week in four, while the Nasdaq
closed above its July peak for the first time. Support is at their 10-DMA (5,830/18,638). The distribution day count stands
at five and one, respectively, as one expired on each index on Friday.

O’Neil Health Care Weekly

XLV declined 57 bps last week and is now testing support at its 200-DMA ($147.21), which coincides with the top of its prior base.
Near-term resistance is at its 21- and 100-DMA, which are both trading just above $150. The sector is now oversold (RSI at 19)
after falling more than 7% off highs in seven weeks and is now due for either sideways action or a bounce from current levels.
Though we still recommend an underweight sector positioning until we see an improving RS line, we would cover extended shorts
and look to increase risk in high relative strength ideas that responded well to earnings.

Market View

The U.S. market remains in a Confirmed Uptrend. Indices pulled back ~1%, breached their 21-DMA (5,782,18,326) and are testing support at their 50-DMA (5,702, 17,953). The distribution day count increased to five on the S&P 500 and remains at three on the Nasdaq.

O’Neil Health Care Weekly

XLV fell nearly 3% last week, breaking below its 100-DMA ($147) and now trading more than 7% off highs. The next support level is
the 200-DMA ($147.01). Its RS line made a year-to-date low, warranting an underweight sector positioning. The RS line is at its
lowest level since 2011.

Market View

U.S. Market

 

The U.S. market remains in a Confirmed Uptrend. The S&P 500 fell 1.0% while the Nasdaq rose 0.2%, respectively for the week. Both are trading 1% off highs. Indices are holding their 21-DMA support (5,784; 18,266), with three distribution days each.

O’Neil Health Care Weekly

XLV declined 49bps last week and is now building a base on top of 100-DMA ($150.42) support. Near-term resistance is at its 50-DMA
($154), followed by the prior high of $159.64. Its RS line remains near lows, warranting an underweight sector positioning.

Market View

The U.S. market is in a Confirmed Uptrend. Indices are in an uptrend as the S&P 500 remains at all-time highs, with the Nasdaq approaching resistance near the July peak of 18,671. Support for both indices is at the rising 10 and 21- DMAs (5,761, 18,146). The distribution day count stands at two and four, respectively.