Although healthcare has outpaced the overall market for more than two years now, MoneyShow’s Tom Aspray sees some yellow flags ahead for some stocks in this red-hot sector.
Stocks sagged to start off the new month, though the losses in the major averages were slight with the S&P 500 down 0.37% but the Russell 2000 was one of the weakest, down 1.07%. Only the Dow Jones Transportation bucked the decline, closing up 0.25%.
The market internals were much weaker than prices with just 871 advancing stocks while 2202 declined. This has caused further short-term divergences in both the Advance/Decline lines and the McClellan oscillator. Another day of equally negative market internals will trigger stronger daily sell signals.
The Eurozone markets are down sharply in early trading with the German Dax down over 1%. The US futures are also lower in early trading and the close today could help determine whether this is just a pullback or a more severe correction.
The healthcare sector has become the favorite of almost all analysts and there are some early warning signs for the Sector Select Health Care (XLV). Even though there are no sell signals for XLV, there are for several of its largest components.
Chart Analysis: The NYSE Composite (NYA) closed below the last five-day lows on Monday and not far above the 20-day EMA at 10,108. The close was below the doji low so a daily LCD sell signal was triggered.
The Spyder Trust (SPY) just avoided an LCD on Monday with the rising 20-day EMA at $178.85. The SPY is still up 9.7% from the October lows.
NEXT PAGE: Topping Healthcare Stocks