Health Care (XLV) has been the worst performing sector so far in 2019 with a year to date gain of under 10% while other sectors like Technology (XLK) has risen upwards of 30%.  Although it still has a large amount of catching up to do with the other sectors, things have been improving over the past couple of months. The sector has put in a series of higher lows and higher highs since early May and is currently sitting just below 52-week highs.  At Wednesday’s close, the sector ETF also experienced a technical “golden cross,” which occurs when the 50-DMA crosses above the 200-DMA as both moving averages are rising.

This was the 17th time in the Health Care Sector ETF’s history that it has experienced a golden cross with the last one was being only four months ago in March; the shortest span of time between golden crosses of all occurrences at only 124 days.  Typically, golden crosses have not necessarily been indicators of consistent outperformance for XLV.  In the week following a golden cross, gains have only been found a little better than half the time with worse than average performance; although median returns are in fact better than other periods.  One month and three months out is when returns have been strongest and most consistent.  Both are stronger than all other periods on an average and median basis. Three months out, gains have been notably consistent with XLV being higher 82.35% of the time.  With a longer time horizon, looking 6 months to one year after a golden cross, XLV returns have been worse than normal. Granted, this is partially due to steep losses around 2000 and 2007. For one year out, huge losses of 31.87% from 2007 to 2008 weigh heavy on this average. For the current bull run, though, there has yet to be a golden cross where XLV was lower six months to one year out. Start a two-week free trial to Bespoke Institutional to access our interactive Security Analysis tool and much more.

In what is a busy week of labor data, results so far have been mixed.  Ahead of Friday’s Nonfarm Payroll Report for June, ADP payroll data released this morning missed forecasts of 140K, coming in at just 102K. While this set the stage for a potentially weaker NFP number on Friday, Initial Jobless Claims (released one day early due to the holiday) came in slightly stronger than forecasts and improved modestly from the previous week.  While not making significant moves lower, claims continue to hold at healthy levels.  Last week’s original print of 227K was revised up to 229K but this week saw an 8K drop to 221K.  Claims were expected to fall to 223K.  This stronger than expected print keeps the streaks going as claims have remained below 250K for a record 91 weeks and below 300K for a record 226 weeks.

The less volatile four-week moving average edged 0.5K higher to 222.25K this week. This is as an input of 219K from late May rolled off the average to be replaced by this week’s higher 221K. The moving average has stayed in the upper end of its range from the past several months and has not made any meaningful move lower since April.

Turning to the non-seasonally adjusted (NSA) data, while the current week of the year typically sees an uptick in claims, the NSA number actually fell from 225.8K to 222.8K this week. For the current week of the year, this was the first time that claims fell week over week on an NSA basis since 2013. Headed deeper into the dog days of summer, claims data historically begins to see some seasonal increases so this drop is less likely to be repeated in the coming weeks. Regardless, this week’s number was the lowest reading for the current week of the year of the current cycle for what was all in all a healthy release. Start a two-week free trial to Bespoke Institutional to access our interactive economic indicators monitor and much more.

Gains have been strong across the board over the past week as the S&P 500 (SPY) finished at another all-time high yesterday.  The only significant laggard has been the Dow (DIA) as it sits 0.9% higher from last Tuesday’s close.  Otherwise, each of the major index ETFs has risen upwards of 3%.  Small and mid caps have outperformed while the performance of large caps has been somewhat weaker.  The Core S&P Small Cap (IJR) has done the best rising by 3.04%. The next best ETF is the Nasdaq (QQQ) with a 2.75% gain.  In spite of these gains in the past week, there are actually fewer ETFs sitting at overbought levels than yesterday.  Whereas there were 11 overbought major index ETFs at yesterday’s open, today there are only 9 as the S&P MidCap 400 (MDY) and Core S&P Mid-Cap (IJH) both moved to neutral on modest declines. Given their uptrends, this also gives them a good timing score in our Trend Analyzer tool.

Looking at performance broken out by industry groups, the two best performers recently have been Semiconductors (SMH) and Solar (TAN).  Both industries ripped over 6% higher in the past week. This brings SMH to be one of the top performing ETFs YTD. SMH also retook the 50-DMA in the past week but has yet to move into overbought territory, helping it to earn a good timing score. Meanwhile, solar has actually been the best-performing industry in 2019 by a wide margin as easing trade tensions have been a factor behind the rallies of both ETFs. TAN has now risen 56.71% YTD and is now trading at extremely overbought levels again.

While both of these ETFs have surged, most other industries have also moved higher as only the Gold Miners ETF (GDX) and US Healthcare Providers (IHF) are lower over the last week.  The underperformance of GDX along with Junior Gold Miners (GDXJ) follows a surge where both become very extended from their 50-DMAs; both are still teetering on extremely overbought levels as well. While not in the red, with oil sliding, energy ETFs like the Dynamic Energy E&P (PXE) and S&P Oil & Gas E&P (XOP) have also been somewhat underperforming. These are currently the furthest below the respective 50-DMAs and the closest to oversold territory. Start a two-week free trial to Bespoke Institutional to access our interactive Trend Analyzer and much more.