HEALTHCARE IS ONE OF THE DAY'S WEAKEST SECTORS AND NOT ACTING LIKE A SAFE HAVEN -- BIOTECHS ARE LEADNG THEM LOWER -- STAPLES, UTILITIES, AND REITS ARE THE REAL HAVENS -- SECTOR SUMMARY TABLE SHOWS A MORE DEFENSIVE SECTOR ALIGNMENT AS STOCK PRICES WEAKEN

HEALTHCARE SECTOR DOESN'T LOOK VERY DEFENSIVE... During a guest appearance yesterday on StockChartsTV with Erin Swenlin and Tom Bowley, one of our viewers asked if healthcare was considered a defensive sector, and was it a good sector to hold in the current environment. My response was that some parts of the sector (like pharmaceuticals) have some defensive qualities. Biotechs don't. In fact, biotechs are one of the riskiest parts of the stock market. Which makes the entire sector less defensive. If healthcare were truly a defensive sector, we would expect it to do better this week as the stock market suffers its worst week of the year. To the contrary, healthcare is one of today's weakest sectors. And it's being led lower by biotech stocks.

UNHEALTHY LOOKING CHARTS...Chart 1 shows the Health Care SPDR (XLV) falling further below its 200-day average today. It's the day's second weakest sector in a generally weak market.The dashed red line is a relative strength ratio of the XLV divided by the SPX. The XLV held up better than the market during the fourth quarter selloff. But it doesn't appear to be doing so this week. The biggest reason for today's drop is heavy selling in biotechs. Chart 2 shows the Dow Jones US Biotechnology Index falling to the lowest level of the year. The red dashed line is a ratio of biotechs versus the healthcare sector. And it shows them leading the sector lower all year. Pharmaceuticals haven't provided much support either. Chart 3 shows the Dow Jones US Pharmaceuticals Index trading below its 200-day average. The falling dashed line shows that group also underperforming the sector. Health care providers (not shown) have been the weakest part of the XLV this year . Biotechs and pharma are the next weakest. Healthcare may have provided some defensive protection during past market selloffs. It's not acting like a safe haven today.

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Chart 1

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Chart 2

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STAPLES, UTILITIES, AND REITS ARE ACTING AS SAFE HAVENS ... The second part of my response yesterday was that the traditional safe havens that should hold up better during a market selloff are consumer staples, utilities, and REITs. And they appear to be fulfilling that traditional role. Chart 4 shows the Consumer Staples (XLP)/S&P 500 ratio bouncing this week. Chart 5 shows the Utilities SPDR (XLU)/SPX ratio doing the same. Chart 6 shows the Real Estate (XLRE)/SPX ratio also rising. Those three defensive groups are holding up better against a market drop today and over the past week. At the same time, the weakest sectors this week have been trade-sensitive sectors like technology, industrials, and materials. All three are being hurt the most by this week's jump in trade tensions. This week's sector rotations also reflect a more defensive market.

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USING SECTOR SUMMARY PAGE TO FIND SECTOR LEADERS AND LAGGARDS... The Sector Summary page is one of my favorite Stockcharts tools. That's because it captures the relative performance of the eleven market sectors over different time periods which, in turn, tells us a lot about the mood of the stock market. Right now, that mood is nervous and defensive. The table below shows today's sector alignment while stock prices are falling near midday. There aren't too many surprises. Three of the top four performers are utilities, real estate, and consumer staples. That's to be expected in a down market. The weakest sectors are technology, healthcare, industrials, and consumer discretionary SPDRS. Industrials and technology stocks are being hit harder by this week's escalation in trade tensions. Retailers are weighing on cyclical stocks. Chart 8 shows the Sector Summary page for the past week. Real estate, consumer staples, and utilities are once again sector leaders; while technology, industrials, and materials are the week's biggest losers. Semiconductors were the weakest part of the tech sector. Materials stocks tied to industrial metals are also being being negatively impacted by tensions between the U.S. and China. Those weekly rotations also show a nervous stock market.

[Healthcare Footnote... Chart 8 shows the Healthcare SPDR holding up relatively well this past week despite today's weak performance. For it to start attracting defensive money, however, it probably needs to show some stronger chart action. Climbing back above its 200-day average would be a good start. The other three safe havens mentioned above are well above their 200-day lines.

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