HEALTHCARE SECTOR CONTINUES TO LEAD -- NOVO NORDISK AND BIOGEN BOUNCE OFF SUPPORT -- MATERIALS SPDR TESTS ITS BREAKOUT -- PALLADIUM OUTSHINES OTHER METALS -- PALLADIUM ETF HITS KEY JUNCTURE -- ENERGY ISSUES WEIGH ON HIGH YIELD BOND ETF
HEALTHCARE SECTOR CONTINUES TO LEAD... Link for today's video. Healthcare remains one of the strongest sectors in the stock market as the HealthCare SPDR (XLV) hit a new high again on Tuesday. Chart 1 shows XLV surging some 18% from its October low and hitting a series of new highs over the last few weeks. The ETF is indeed overbought and ripe for a corrective period, but it is by no means weak. The early November consolidation marks the first support zone in the 67-68 area. The indicator window shows XLV relative to SPY using the price relative (XLV:SPY ratio). This relative strength indicator also hit a new high and XLV is leading the broader market. Chart 2 shows the Equal-weight Healthcare ETF (RYH) keeping pace with its cap-weighted brother by hitting a new high last week.
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Chart 1
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Chart 2
NOVO NORDISK AND BIOGEN BOUNCE OFF SUPPORT ... Biogen Idec (BIIB) is leading the group higher today with a 5+ percent surge. Chart 3 shows the stock with a massive advance in 2013 and a big triangle in 2014. This looks like a bullish continuation pattern and a break above the upper trend line would open the door to new highs. The stock has lots of support in the 300 area because it bounced off this level twice in the last two months.
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Chart 3
Chart 4 shows Novo Nordisk (NVO) consolidating within a long-term uptrend. The stock hit a new high in February and then moved sideways the last nine months. There is a lot of support in the 42 area and the stock bounced off this zone over the last three weeks. Novo Nordisk is not part of the HealthCare SPDR though. It is a Danish pharmaceutical company that is the world's largest maker of insulin, which is used to treat diabetes.
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Chart 4
MATERIALS SPDR TESTS ITS BREAKOUT... I wrote about the triangle breakout in the Materials SPDR (XLB) on November 11th and showed Net New Highs moving back above +5 percent. Chart 5 shows ETF going on to hit an intraday high in late November and then falling back with a sharp decline the last six days. XLB is getting a bounce today and testing a key area. The triangle breakout and Raff Regression Channel mark uptrend support in the 48-48.50 area. A move below this level would negate the triangle breakout and be negative for the ETF. The indicator window shows High-Low Percent slipping back to zero, but I would not turn bearish on this indicator unless it moves below -5%.
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Chart 5
PALLADIUM OUTSHINES OTHER METALS... It has been a rough ride for metals over the last six weeks, but two stand out since mid October. The PerfChart below shows the percentage change in six key metals since mid October, which is when the stock market bottomed. The Silver ETF (SLV), Gold SPDR (GLD), Platinum ETN (PGM) and Copper ETN (JJC) are down, while the Aluminum ETN (JJU) and Palladium ETF (PALL) are up. I would not go as far as to suggest that money is rotating into aluminum and palladium, but these two are clearly the strongest of the lot. Note that this PerfChart does not include today's data. PALL is up slightly today, but JJU is down over 3%.
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Chart 6
PALLADIUM ETF HITS KEY JUNCTURE... Chart 7 shows the Palladium ETF (PALL) within an uptrend over the last three years. The ETF is at an interesting juncture because it fell to the July 2012 trend line in September and firmed the last two months. Even though gold and platinum remain under pressure since mid October, PALL got a bounce off support and edged above its October high last week. Note that palladium is a key component in catalytic converters for cars. The decline in gasoline prices could spur auto sales and usage, thus increasing demand for palladium. Auto-Truck sales will be reported at 2PM today and analysts are expecting strong numbers.
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Chart 7
ENERGY ISSUES WEIGH ON HIGH YIELD BOND ETF ... The High Yield Bond SPDR (JNK) and the High-Yield Bond ETF (HYG) were hit hard over the last few days and much of the blame goes to energy-related issuers. The SPDR website does not provide a good breakdown for the JNK holdings, but the iShares website shows that 14.6% of the holdings in HYG come from the energy sector. These issuers already have junk status and the plunge in oil prices is certainly not going to make repayment easier. Note that oil peaked in the 107 area in mid June and fell below 70 recently.
Chart 8 shows the unadjusted High-Yield Bond ETF (_HYG) peaking in late June and falling around 5% the last five months. I am using unadjusted data to remove the dividend payments and focus on price action, which is essentially one's principal. Chartists can precede any symbol with an underscore (_HYG) to see unadjusted data. This unadjusted chart paints a more bearish picture because its shows the ETF hitting a 52-week low in October and again in November. The trend here is clearly down and will likely extend as long as oil prices remain low. Chart 9 shows the dividend adjusted HYG chart with the dividends for reference.
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Chart 8
