HEALTHCARE SPDR HITS 52-WEEK HIGH -- LEADERS INCLUDE ALLERGAN, MEDCO HEALTH, AND ZIMMER HOLDINGS -- BRISTOL MYERS SQUIBB ACHIEVES BULLISH BREAKOUT -- PHARM HOLDERS SHOW NEW RELATIVE STRENGTH

HEALTHCARE SPDR HITS NEW HIGH ... With the market pausing after yesterday's strong rally, defensive stocks like consumer staples and healthcare are gaining some ground today. Of those two, healthcare is the stronger. Chart 1 shows the Healthcare SPDR (XLV) breaking out to a new 52-week high today. Also impressive is the recent upturn in the XLV/SPX ratio (green line) which means that healthcare stocks are starting to outperform the S&P 500 for the first time since July. In fact, healthcare has been an underachiever since the market bottomed in March (as have all other defensive categories). The fact that investors are starting to move into that group may reflect some caution after the market's strong run, or a search for undervalued market groups that carry less risk.

Chart 1

SOME HEALTHCARE LEADERS... The three next charts show where some of the healthcare leadership is coming from. All three stocks are at or very close to new 52-week highs. Their relative strength lines, which had been relatively flat, are starting to rise as well. That's a healthy combination.

Chart 2

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Chart 4

BRISTOL MYERS SQUIBB IS BREAKING OUT ... My favorite chart pattern among big pharmaceutical stocks belongs to Bristol Myers Squibb. You can see why in Chart 5. The weekly bars show the stock trading over 23 today which puts it above its early 2009 peak and the highest price in 21 months. That looks to me like an impressive bullish breakout. Its relative strength line (below chart) is starting to turn up for the first time since March.

Chart 5

PHARM HOLDERS NEAR 52-WEEK HIGH... Another way to play a healthcare rally is with Pharm Holders (PPH). Chart 6 shows the ETF nearing a new 52-week high. Its relative strength ratio (solid line) has just broken a down trendline extending back to last March. If you're looking to put some new money into the market, but aren't sure where, healthcare might be a good place to look. Not only is the group showing good relative strength, there's less risk involved.

Chart 6