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.