Sector Overview:

In the overall markets today we witnessed more chatter about what many have been talking about recently. Is value finally going to begin to outshine growth, something it has not done in over a decade? Today there was huge bifurcation with the more conservative Dow and S&P 500 clearly acting better than the Nasdaq and Russell 2000, the latter two indexes both fell Monday by .1 and 1.4%, with the Russell a real outlier. Healthcare overall is often interpreted as a value group, although we obviously know there is biotech inside. Below shows how the XLV is leading the IBB by the slimmest of margins since last December. Notice how volatile the biotech space has been as the green line is erratic, while the XLV drudges along in a smooth, unassuming manner. The IHI which we discuss later has bested the two other peers by a double, and do not look for that to change drastically going forward. Locate strength, then buy your best of breed companies.


There are very few successful turnarounds in names in any sector, that comeback from the depths of being down from near 240 back in August ’15 to an 8 handle in April of ’17. But that is just what the chart below, BHC and how it appeared in our Tuesday 9/25 Game Plan, did and it should be given credit for doing so. The CEO, Joe Papa, must be admired for the work he has done since taking over the helm in May ’16. I however just focus on PRICE action and this name and it has tripled since the intraweek lows made back during the week ending 4/28/17. It is prone to streaky runs higher and the current situation is no different as it is on a 3 week winning streak up by a combined 23%, and this week is off to a hot start already. Most important is how well it is acting POST breakout from the double bottom breakout trigger of 24.96 on 9/20. We know the best breakouts tend to work right away and offer additional buy points on the way UP, and one can add to above a cup base pivot of 27.89.

Relative performance:

Like every group there is a diverse group of subsectors embedded within. When one identifies which specific ones are acting the best, one chances of success increase dramatically. The devices have been hard to ignore for a long time as the ETF has advanced 19 of the last 25 weeks, and is a great example of trends in motion tending to stay that way, rather than reverse. We have spoken of the positive action in the biggest components like MDT and ABT, the former wrestling with the very round par figure presently and the latter now on a 10 session winning streak. But one can point to DHR, the fifth largest stock in the fund which was in the news today somewhat as its former CEO will now run GE, a company now trying to decide what to do with their healthcare unit. Perhaps the hire is no coincidence. Danaher is on a current 5 week winning streak and lost ground just 4 sessions in all of September. 

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