Healthcare Overview:

For the last 6 months healthcare has been the place to be. Whether one has been invested in the IBB, XLV or IHI, all higher by 12, 14 and 30% YTD, your returns should have been strong. Looking at the formerly traditional “big three” with AMGN, BIIB and CELG, has seen some big bifurcation as AMGN sits at all time highs and CELG is more than 40% off its most recent 52 week highs. For certain not all names have benefitted, or perhaps they faltered because of lack of exposure to the area, as GE which earlier this year said it was divesting its healthcare unit, just as the group began its overall, nascent advance. The stock now sits 54% off its most recent 52 week highs and started the week off poorly down 3.5%. Bears may try to downplay the bullish move in the healthcare group as a whole, as defensive spaces like healthcare, and staples typically are the last to hold onto their strength before the overall market fades. Market participants sell their conservative holdings last, after they sell their technology holdings as they become even more risk averse.

The IHI ETF has been a wonderful actor in 2018. It is higher 4 of the last 6 weeks, and 3 of the 4 weekly gains have been more than 2%. Names like MDT and ABT, the two largest components in the space, are both up better than 20% in 2018 so far. So much for lackluster performance in these supposedly boring names. Today a robust move was witnessed by a medical equipment play ABMD, as it surged 9% on the second best daily volume in the last 2 months. Sure there was concern following the weekly loss of almost 13% ending 7/27, that sliced its 50 day SMA for the first time decisively since January ’13, but a spinning top candle on 7/31 followed by a bullish engulfing candle on 8/1, paved the way for a series of higher lows. The chart is looking healthy again, pun intended.

Relative Performance:

On the chart below it is easy to view just how well the healthcare group has come since the beginning of May compared to the S&P 500. Today the group demonstrated some decent relative strength as it was one of just four of the major S&P groups to advance, albeit softly. It is nice to see sectors act well on a somewhat poor tape, but healthcare is the best performing group, on a longer term and more important basis, now on a one, three AND six month time period. Over the last 6 months alone the XLV has gained nearly 20% (YTD it is the third best actor up more than 15%, behind the cyclicals and technology which have both risen more than 18%).

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