The S&P 500 Index enjoyed one of the best weekly out performances against the Technology-driven NASDAQ Composite Index in the past four years. Last week’s sector rotation has pushed many other S&P sectors into leadership roles, at least from a near-to-medium term perspectives as we believe Technology and Telecom sectors remain the structural growth areas, longer-term.
The rotation into the Healthcare is interesting as S&P Healthcare Sector (XLV) has been building a significant technical base around the previous peaks of Jan/Feb/Jun 2020 at 104.13, 103.89, and 103.78, respectively. The ability of XLV to surge above 104 late last week via a gap-up breakout on 7/16/20 now signals the emergence of a new leadership sector.
A brief review of the S&P 500 sector RRG rotation over the near-term also suggests increasing relative strength and relative price momentum as the S&P 500 Healthcare (XLV) has now moved into the Leading Quadrant joining the current S&P leadership sectors such as Technology (XLK), Communication Services (XLC), Materials (XLB), and Consumer Staples (XLP).
Another technical study involving SCTR technical ranking also decisively favors the Health care sector. Based on the current SCTR ranking perspective all three market-cap SCTR lists including Large-Cap, Mid-Cap, and Small-Cap show Healthcare stocks occupying the bulk of the top 10 SCTR ranked lists. For instance, in the large-cap market 4 of the top 10 names or 40% ranked by SCTR are Healthcare names. Within the mid-cap arena, 60% of the top 10 ranked names are Healthcare stocks and in the Small-cap area, 7 out of 10 of the top names are Healthcare.
Within the Healthcare Sector, it appears investors are favoring the following industries including Biotechnology and Medical Equipment as evidenced by their respective technical breakouts. However, Medical Supplies, Pharmaceuticals, and Healthcare Providers are nearing important technical resistance zones. Confirmed breakouts would suggest emerging leadership roles.
In summary, the above technical developments including technical breakouts, RRG rotation, and SCTR rankings show the Healthcare emerging as a leading sector. Biotechnology and Medical Equipment industries are the current leaders and Medical Supplies, Pharmaceuticals, and Healthcare Providers possibly emerging as new leadership groups in the future.