The Health Care Select Sector SPDR (XLV) , the largest health care exchange traded fund by assets enters Thursday with a year-to-date gain of almost 10.9%, meaning the ETF has surpassed the Energy Select Sector SPDR (XLE) and the Utilities Select Sector SPDR (XLU) for top honors among the nine sector SPDR ETFs this year.
XLV has more than doubled over the past three years. Given the ETF’s and sector’s recent and long-standing strength, now is a good time to evaluate XLV from a technical perspective.
“XLV has done really well the past few years, as its outpaced the S&P 500 by a large margin. The only Sector (lower left corner) that is ahead of Health Care over the past five years is consumer discretionary,” notes Chris Kimble of Kimble Charting Solutions. “The strong rally in XLV has taken it up to the top of its rising channel and a Fibonacci Extension level based upon the 2007 highs and the 2009 lows.”
Against the backdrop of health care sector strength, investors have not been shy about putting money to work in the sector. XLV pulled in $843 million in new assets for the week ending Aug. 8, reports Joseph Ciolli for Bloomberg. Among sector ETFs, only XLE has pulled in more new assets than XLV this year. [Investors Heart Health Care ETFs]
That says investors have not been turned off by volatility in biotech stocks and intense criticism of the Affordable Care Act.
XLV devotes 20.2% of its weight to biotech stocks. The ETF also features a combined 31.3% allocation to health services providers and equipment makers, groups that have directly benefited from Obamacare. [Obamacare a Boon for This ETF]
With all the enthusiasm investors have displayed for health care stocks and ETFs, enthusiasm that has generally been rewarded, XLV’s chart still shows the fund is at or nearing a critical technical juncture and its near-term action could be telling.
“At this time the trend in health care is up, as its above support and long-term moving averages. Humbly I believe it often pays to keep a close eye on leadership. What XLV does with this pattern could be important to the broad market,” said Kimble.
Health Care Select Sector SPDR
Chart Courtesy: Kimble Charting Solutions