Time to Keep a Close Eye on the Health Care Sector
The health care sector experienced a near -10% pullback from early September into October. As always, the question on investors' minds is, "Is this merely a correction in an ongoing bull market? Or is it the start of something bigger?"
While the ultimate answer can only be known for sure in hindsight, at least two factors are flashing signs of hope for the health care sector. For trading purposes, we will focus on ticker XLV (Health Care Select Sector SPDR Fund).
XLV BREATH (%>50-Day Avg)
This test looks at a measure of breadth for ticker XLV and identifies those times when:
- The 5-period moving average of XLV component stocks above their respective 50-day average
- Crosses above 12
The input screens appear below. You can run this test by clicking here.
The chart below displays previous signals. The most recent signal occurred on 10/11/2021.
The table below displays a summary of the results.
As you can see:
- The best performance is in the 6-month to 1-year time frame
SEASONALITY
6 to 12 months is a long way off. So let's look at a reason to consider XLV in the near term. The chart below displays the Annual Seasonal Trend for ticker XLV.
Note that a period of seasonal strength begins after Trading Day of Year (TDY) #197 and extends through TDY #11 of the following year.
The chart below displays the hypothetical cumulative % growth from holding XLV ONLY from TDY #197 each year through TDY #11 of the following year, starting in October 1985.
The table below displays a summary of the results