Gavekal Capital: Health Care Stocks Have Rallied Nicely In North America But Look Tired

Tuesday, May 20, 2014

Health Care Stocks Have Rallied Nicely In North America But Look Tired

Five weeks ago 64% of the MSCI North America Health Care stocks were trading above their 200-day moving average.This was the fewest number of stocks trading above their 200-day moving average since December 28th, 2012. This slight sell off did not last long as Health Care stocks have now moved back into basically overbought territory at 78% as of last friday. Using this simple measure, we haven't seen a truly oversold signal in Health Care stocks since November 2011.

% of Issues Above 200-Day Moving Average

This latest move has pushed stocks from about 2% over their 200-day moving average to almost 6% above. We have also seen the percentage of stocks outperforming the MSCI World Index move from 44% (lowest level since April 25th, 2012) to 56%.

Price Relative to 200-Day Moving Average

Somewhat surprising given the move, the 200-day Net Advances has actually fallen over the past 5 weeks and the Net New 200-Day Highs haven't really expanded. This may be a sign that the this was more of a bounce (at least for the moment) rather than a resumption of the multi-year advance.

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