Defensive Posture:
Bulls taking a look at the leaderboard this week will be sleeping a bit uneasy this weekend. Below are the weekly gains from the major 11 S&P sectors, and it is chock full of conservative leadership in the top four performers. Healthcare was the best actor and the XLV is now just below a double bottom trigger of 93.74. The ETF trades just 3% off most recent 52 week highs and is up 3 of the last 6 weeks, as it was preceded by a very taut run which advanced 10 of 13 weeks ending between 7/6-9/28. The XLV on a YTD basis, a nice sample size with less than 2 months to go, is also the best player higher by 13.7%, one of only three groups up double digits in 2018 including consumer discretionary and technology. The chart has traded sloppy for about a month now, and that wide and loose trade is a hallmark bearish trait. It demonstrated that type of behavior between February-May, and actually formed a descending triangle with support with the bottom line at the round 80 number. That resolved itself obviously to the upside, and it resumed very taut bullish trade between May-September before its most recent bout of volatility. The ETF rose nearly 3% Wednesday after the mid term election results, as healthcare was the top concern among voters. Will market participants have anything to worry about with the group into year end? Time will tell.
Biotech Divergence:
Not acting healthy at all this week, pun intended was the IBB. The biotech ETF actually fell this week, albeit fractionally, by .3%. Nearly one third of the fund is concentrated with outdated leaders AMGN GILD BIIB and CELG. Two of the four are in bear market mode with GILD and CELG 21 and 33% off their most recent 52 week highs. The IBB’s 200 day SMA is now curling lower, which suggests a negative trend change is taken hold. It formed a double top with bearish engulfing weeks ending 9/7 and 10/5 which slumped 3.6 and 4.4% respectively. The ETF has declined 5 of the last 6 weeks, and all 5 falling weeks CLOSED in or at the lower half of the weekly range. It will be very interesting to see how the very round par number will react if the figure is touched. Last week was the SIXTH successful bounce off 100 dating back to last August.
Examples:
The equipment plays within healthcare continue to act well. Below is the chart of BSX, and how it was profiled in our Healthcare Report from 10/31. The name is an “old healthcare tech” play that has weathered many a storm as its supertanker status lives on. It was the subject of a takeover from SYK back in early June, and notice on the chart it CLOSED near the 35 number in June and August, and that resistance is now support. It completed a bullish piercing line candle on 10/30 and quickly reclaimed its upward sloping 50 day SMA. The stock never came close to challenging its 200 day SMA in October, great relative strength and a tell, as the vast majority of overall names fell BELOW the long term line. This week it rose 4.9% and is on a 4 session winning streak and is sniffing out an add on buy point above a 38.72 double bottom trigger. Admire that it advanced 23 of 27 weeks ending between 3/30-9/28, and 3 of the down weeks lost less than 1%.