Healthcare Ailing:

It has been a sloppy start to the year for the overall healthcare group via the XLV. One can see here it has added “just” 3% YTD, making it the ninth best of the 11 major S&P sectors. Weighing on the group is biotech with the XBI down more than 6% in 2024 thus far (looking at biotech seasonality for the last 5 years, notice the first four months between January-April have all shown an average MONTHLY loss). The daily chart below of the XLV is sporting a break ABOVE bear flag which can be powerful to the upside as we know from FALSE moves come fast ones in the opposite direction but this one lost its momentum as the week wore on (one can make the argument for a bearish head and shoulders and notice the negative RSI divergence). The fragility of the ETF is not surprising if one were to take a look at the top holdings. LLY was a round number theory victim at 800 two months ago and now sports a bearish rounded top, and a move below 720 carries a measured move to 640. UNH, just 2 weeks ago recorded its first double-digit WEEKLY gain since the week ending 11/6/20, and on 4/16 completed a bullish island reversal but still feels like a lot of overhead supply above (remember also has a big impact on the PRICE weighted Dow being the highest priced member). The number 3 holding in JNJ looks like a break under the late October lows is likely.

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