Seasonality Opportunities?
Healthcare overall has been a laggard, as the XLV on a YTD basis is just one of three major S&P sectors lower heading into September (along with staples and utilities). But from a seasonality perspective, September has been an anomaly with each of the last 4 years CLOSING lower than where it started and lower by an average of 2.6%, tying it with a dismal month of February. But notice what happens right afterward is the 3 months in Q4 the XLV averages nearly a 4% gain each month. Will investors begin to try and anticipate that and start buying toward the end of September? How would the XLV have acted if not for the robust action in LLY? Sure top holding UNH has the look of a WEEKLY bearish rounded top, and JNJ has now given back almost all of the powerful two-week combined gain of 9% the first 2 weeks of July. Looking at the seasonality chart of the XBI below September has also CLOSED lower from where it started each of the last 4 years by an average of 4%. Those showers bring October-November flowers with a combined gain of 9%. Will that occur this year again? Of course, no one knows but investors may try and front-run the seasonality and I would not act on that until a bullish catalyst presents itself. For me, that would be a decisive move above the round 80 number.