Post Summer Biotech Blues:
The XBI has been the anchor holding down the overall healthcare group as the XLV continues to be the “worst” actor on a YTD basis higher by nearly 7%. Names like AMGN which has been below its 200 day SMA for the most part since February, are a big reason why. Other former leaders swim in bear market mode including BMRN ILMN REGN and ABBV to name a few. Below shows a seasonality chart of the XBI and notice June held true to form, but July has been a soft month for the ETF, and the upcoming August-October period is easily the worst 3 months for the space. It is hard to blame this weakness of the upcoming election, as softness has been since since last summer failing near the very round par number. Without real leadership in the arena, it is best to steer clear until PRICE action begins to show you it deserves your capital.
Equipment Being Left To Its Own Devices:
It should not be news to market participants that the medical supplies/equipment group has been powerful in 2019. Keep in mind trends tend to stay in motion, more often than they are to reverse. The IHI is higher by 24% YTD, and the XBI has advanced 17% (both have very small dividend yields), but to look at the most recent performances shows a stark contrast. The IHI trades just 1% off most recent all time highs, while the XBI now sits 17% off its most recent 52 week peak. The latter is looking at its potential first 4 week losing streak since last October, and the ETF has negative volume trends with zero weeks of accumulation since the week ending 11/2/18. An undercut of its downward sloping 200 day SMA looks imminent, and another adage goes “nothing good happens below the 200 day”.
The medical equipment/supplies group has been what has held the fragile healthcare space together this year. Biotech has been shaky, and the providers after a very respectable run is giving some back the last couple weeks, as it should. If healthcare traders have been successful in 2019, it is most likely due the names we discussed in the first sentence of this paragraph. A good example could be EW and below is the chart and how it appeared in our 6/20 Healthcare Note. It is higher 7 of the last 8 weeks, and has jumped more than 9% this week thus far, after an earnings release. The stock currently trades just 3% off most recent all time highs.