MORE ON HEALTHCARE INTERVIEW

FRIDAY BLOOMBERG INTERVIEW ... Some of you may have watched my 7:10 am interview on Bloomberg TV this morning. I discussed the upside breakout in the healthcare sector that I wrote about here earlier in the week. For those of you who missed it, however, I'd like to show the same charts that we used on the air earlier today to make my point more clearly about the activity within the healthcare group itself. Chart 1 shows the Health Care Select SPDR (XLV) closing above its early 2004 peak this week to achieve a bullish breakout. [It's now challenging its 2000 peak]. The rising relative strength line since the end of 2004 shows that healthcare has been a market leader year (along with energy and utilities). The point I made this morning was that the XLV provided a vehicle for buying the entire healthcare sector. But there were two other ETFs that also provide exposure to the healthcare group in biotechs and drugs.

Chart 1

BIOTECH BREAKOUT ... The biggest gainers in healthcare over the last two years have been the HMOs which look pretty expensive to me. But there are two other cheaper choices. Of those two, my favorite is the biotech group. Chart 2 shows the Biotech iShares (IBB) having broken through their early 2005 peak to achieve an upside breakout. The relative strength ratio plots the IBB divided by the Health Care SPDR (XLV). It shows biotech outperformance within the healthcare group starting at mid-year. The weakest healthcare group has been the drugs. Even they're starting to act better.

Chart 2

PHARM HOLDERS MAY BE BOTTOMING ... Chart 3 shows the Pharm Holders (PPH) over the last two years. The PPH has been the weakest part of healthcare. However, a bounce this week pushed it above its 50-day moving average and broke short-term down trendlines. Although it still has a ways to go to turn its main trend higher, the PPH appears to represent to cheapest entry into the healthcare sector. So investors have three ETF healthcare choices. They can buy the entire sector with the Health Care SPDR (XLV). Or, they can buy the Biotech iShares (IBB) which have just achieved a bullish breakout. More value-oriented investors might favor the Pharm Holders (PPH) which may be just starting a turn to the upside. At least, that's the main point I was trying to make on the air. Given time limitations on TV, I'm never sure how clear my explanations are. That's why I prefer writing here to doing TV. At least here I can take the time to make sure that my views are clear. They may not always be right; but at least they're clear.

Chart 3