Overall everyone is aware of the weakness within the healthcare group. On a YTD basis it is the 10 best major S&P sector of 11, with the XLV higher by just more than 3%. Even Tuesday with a very soft session, one would have thought that investors would have gravitated toward the space, but again it was just the 10th best actor dropping 1.9%. Below we show a chart of the small cap ETF, which is an illiquid vehicle, but its chart paints the bearish narrative. With market participants still searching for yield, they are preferring the more mature names as seen on the ratio chart. The PSCH is in danger of falling beneath a symmetrical triangle formation, which could see a precipitous, further drop. It sits very close to bear market mode down 18% from most recent 52 week highs, while the XLV sits 8% off its most recent yearly peak.
New Issues On Life Support:
The incessant talk of the weakness of new issues recently has reached a fevered pitch, and of course the health care group was not immune from the calamity, pun intended. One can just take a look at the charts of a couple I will mention here in SILK and SWAV to see just what I am talking about. Both names started with such promise as SWAV recorded a 4 week winning streak between weeks ending 4/26-5/17, that screamed higher by more than 80%. Since then it lost ground 14 of the last 17 weeks and now trades 56% off most recent yearly highs. SILK traded between the round 30-50 numbers between this April-May, but has slumped 10% this week already, AFTER falling the previous 5 weeks.
Keep a close eye on how stocks react to bad news. If they shrug off good a really soft tape, especially in a weak overall sector, it is obviously a good thing. Below could be a prime example of that with the chart of ARWR and how it appeared in our 10/3 Healthcare Note. The name was lower by 1.1% today on a poor tape, and is higher 5 of the last 7 sessions beginning with a bullish engulfing candle on 9/30, with all five advancers CLOSING in the upper half of the daily range. Last week gained 13.5%, and this week so far has added more than 3%, while the IBB is lower by 2%. The right side of the potential cup base we discussed below is taking shape, and the 36.90 pivot should be watched headed into year end.