Healthcare Anchor:
The XLV’s weakness continues as it is by far the “worst” behaved major S&P sector thus far in 2019. The ETF is still higher by more than 3%, but its second nearest competitor, the utilities, are higher by double digits up 10.6%. We recently spoke of energy being feast or famine, and one can say the same about healthcare as 4 of the last 6 years it has been in the top 4 on the yearly sector leaderboard. Even when it was THE worst actor in 2010 and 2016 the damage was limited. In 2019 on an absolute basis the 3% plus gains are not so bad, but compared relatively this year to a technology group up nearly 30% and the discomfort is evident. Last week we spoke of the seasonality potentially kicking in. Maybe that will soothe the value players somewhat going forward.
Biotech Bloating:
The biotech arena has been weighing down the healthcare space. Prior best of breed names, like ABBV and RGEN, still linger in bear market mode lower by more than 20% from recent 52 week highs. Other like AMGN and BMRN are very close down in the high teens from their recent peaks. The XBI fell more than 10% the weeks ending 4/12-19, and this week is lagging once again off by 4% heading into Thursday (other bearish weeks ending 3/8 and 3/22 dropped 5.8 and 3.7% respectively, both in elevated volume). Will the rhetoric concerning drug prices during the primaries for next year election start to weigh?
Examples:
One always wants to pay close attention to names that are bucking the trend in a weak overall group. They will often be the first big winners out of the gate once the sector sees some positive rotation back into it. Below could be a good example with the chart of NVTA and how it appeared in our 4/24 Healthcare Report. This is a stock that still has a rising 50 and 200 day SMA, with nice space between the two. There were a couple things to like with the nice action POST breakout, and we know the best ones tend to work right away. More recently it held its 50 day SMA for the initial time following the breakout last week, often a good risk/reward entry spot.