Thursday Midday Color - Health Care, Opex
Here's what's piquing my interest so far on this pre-holiday Mueller-fest.
Damaged
The carnage in health care stocks over the past few days has generated some interesting readings in the breadth metrics. The move was swift and severe enough that more than 60% of stocks in the sector closed below their lower Bollinger Bands.
Nearly 80% of them broke down out of their month-long ranges.
As a result, nearly 40% of the stocks are now oversold.
The impulse has been strong enough that the McClellan Oscillator for the sector is below -120.
It's no surprise, then, that health care stocks are among those with the lowest optimism. The Long Ideas screen shows stocks within the S&P 1500 that have the lowest optimism while still trading above their 200-day averages. Quite a few health care and biotech names.
For a stock like Merck, it was still trading above its 200-day but over the past 5 days the Optimism Index averaged less than 15.
Overseas Jollies
At the other end of the spectrum, many overseas stocks have been chugging along with great momentum. It's been enough for French stocks that the McClellan Summation Index is above 1500. The only two other times it managed this, it was hard to sustain.
Swiss stocks have also been holding up well. But now nearly 60% of them are overbought.
Seasonality
The stock market often drifts higher the day before an exchange holiday, with weakness the day after. Good Friday (tomorrow) isn't much of an exception. But because the holiday moves around, it's not the best tell on seasonality. If we use April option expiration, though (today), then we get a more consistent look. Returns were weak the day after, not so much after that.
There have only been a few times we've entered this time frame when close to a 52-week high.