From the desk of Tom Bruni @BruniCharting
In 2018 the trend of small-cap Healthcare out-performance over its large-cap counterparts accelerated aggressively, with the small-cap ETF $PSCH returning 30.50% YTD and the large-cap ETF $XLV up a meager 1.70%.
Click on chart to enlarge view.
Despite XLV’s under-performance relative to small-caps and the broader market, some signs of improvement have been developing over the last few weeks. As we can see in the ratio of $XLV / $SPY below, prices retested their 2017 lows as momentum diverged positively. This suggests at the very least we don’t want to be short on a relative basis.
On an absolute basis $XLV made nearly 4-month highs last week and is attempting a breakout after 6 months of consolidation. A close above 86.60 would suggest prices are heading to our next upside price target of 101.30. We also want to see momentum get back into overbought territory.
The charts above suggest large-cap Healthcare is the next group to benefit from the sector rotation that’s been driving this 2-year-old bull market.
Here is a list of all of the Healthcare stocks we want to be buying.