SOTU Health Scare?
During the State of the Union Address last night President Trump made a quick reference to clamping down of elevated drug prices. What was the market reaction? The XLV was the best performing major S&P sector, higher by a lukewarm .44%. The ETF has now recorded five consecutive CLOSES above the round 90 number, and today registered a bullish engulfing candle. If it can move above 91 it would negate the doji candle which is a concern from the 2/1 session. On a YTD basis, albeit small sample size, it has only bested the utilities with a gain of nearly 5%. Perhaps the group is ready to flex its muscles and move toward a double bottom pivot of 96.02 in the coming months.
The medical equipment group was not immune, pun intended, from the drawdown in late ’18. It however is making a tidy recovery, and now sits just 6% off most recent all time highs. Compare that to some of its peers in the overall space like the PPH and IBB which are lower by 8 and 11% from their respective highs. Below is the ratio chart contrasting the IHI to the S&P 500. MDT, the 2nd largest component is nearing a test of the very round 90 number which aligns with both its 50 and 200 day SMAs. A break through their sets up a potential move to the very round par figure that held it back last September.
The pharma group has seen some nice action in large cap tech names, with stocks like LLY, MRK and ABT just a couple percent off their most recent 52 week highs. Do not discount some of the smaller cap names like an HZNP or AMPH. Below is the chart of ARNA and how it was looked at in our 1/31 Healthcare Report. The stocks broke above a bull flag pivot of 45.25 and proceeded to take out an add on double bottom of 48.55 on 2/5 up 2.3% in heavy trade. It looks to be stalling here and remember the best breakouts work right away so if todays retreat intensifies keep the name on a short leash.