Saturday, October 22, 2016 10:00 AM EDT
The health sector has been a sector leader in recent years, driven by a strong uptrend in biotechnology. When stock markets collapsed after the summer of last year, biotech took a hit as well, and ceased being a leader. The sector has struggled since then.
Right now, biotech is having a hard time again. It has dipped again into a long term support area. The first chart shows the IBB ETF, representing the biotech sector, entering that red support area on the chart which goes back to the early days of 2014.
Why is it important that biotech better not break down? The general issue is that sector leaders are leading the other sectors higher or lower. So with a breakdown of biotech, the whole market could come down.
Moreover, as biotech is testing support, so is the whole health sector, as seen on the next chart featuring the XLV ETF. Biotech is only a part of the health sector, but all components are obviously related. Though this chart has a slightly more promising look, as the sector broke out in July of this year, it also reveals that the health sector is potentially vulerable at this point.
It will be extremely interesting and also important to see how November unfolds.
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