Healthcare comprises 14.74% of the S&P500 index. If we consider that the technology sector (XLK) is on a sell signal and XLF nearly triggered a sell signal yesterday (pie chart above), its not hard to project more weakness into next Tuesday.
Three sectors comprise more than 50% of the S&P500 weighting, as you can see in the pie chart.
Meanwhile, the SPY broke support yesterday. Price is below the 9/20ema and 50ma. All three are rolling over with RSI,, stochastic and MACD following along.
Healthcare has been on our radar for many weeks, as many of these well known companies peaked in August and September. Nearly all of industry groups therein reflect relative weakness. It was and is our contention that those candidates that based near the 200ma, might be longer term swing/position trades into the year end.
XLV has taken a beating over the last few weeks, dropping below its 200ma. We remain confident that this sector must turn North, before the S&P500 returns to fresh new highs.
There is a silver lining of course. After the election these stocks will be setup/basing near 52 week lows. We will be looking for healthcare companies to regain their strength, once resolution to current issues subside and a candidate implements policy.
Staples are in focus – (XLP)
Futures have gyrated above and below closing levels this morning. Considering the above and traders reluctance to take on additional risk, I would think lower prices are more probable in the short term.
We will look to fade strength again, should market internals confirm.
One week to go.
Happy Trading – Vinny
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