By Michael Nauss, CMT, CAIA, CDMS
1/ Homies and Healthcare
2/ Homebuilders
3/ Healthcare
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1/ Homies and Healthcare
Over the last few weeks, the market has taken investors on a ride and shaken many people’s faith in the latest bull run.
With a powerful opening to the year on the S&P 500 (SPY), we struggled at the highs from March 22, along with where the initial bear market started.
However, this week, we lead off with a strong move on some positive economic data and are looking to retest those highs. In these moments, investors must look under the hood and see what sectors could be setting up for some relative strength over the market.
2/ Homebuilders
While the overall market struggles well below all-time highs, homebuilders attempt to break into new highs.
We see many strong names within this sector, but Toll Brothers (TOL) stands out to me since it has cleared its all-time highs, pulled back to retest them and continues to move higher.
3/ Healthcare
The drawdown we saw in healthcare during the most recent bear market was minimal compared to what we have seen happen to most sectors. Instead, the industry has been decreasing in volatility and prices getting “tight” while it waits for the next move.
Measuring using Bollinger bandwidth (a measure of price volatility), the last time we saw this tight price was in 2019 before a decisive run. This is because the sector contains stocks on epic runs, like Eli Lilly (LLY) and names under pressure, like Moderna (MRNA). For this reason, I will be waiting for the break of the overall index and playing that. This removes the single stock risk in a volatile sector.
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Originally posted 5th September 2023
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