Overall, prices fell down to key make-or-break support and held up miraculously well yet again.
Tuesday’s breadth was far better than that seen on Monday, even when the Dow Jones Industrial Average (INDEXDJX:.DJI) was down 180 with hardly any more Declining issues than Advancing. Momentum dipped on hourly charts, but didn’t nearly reach prior lows, creating a level of positive divergence as price hit new lows while momentum was higher.
The bottom line remains: The larger area of price support formed on the S&P 500 (INDEXSP:.INX) and Nasdaq 100 over the last few months ended up holding again by the close (as prices rallied well off early lows). And until we see evidence of this breaking, it remains difficult to assume too much of a bearish stance.
Health Care Sector (DRG, BTK, IHI, etc.)
Healthcare stocks remain in focus given Tuesday’s rally to multi-day highs in DRG, BTK, and Medical Device ETFs like IHI (NYSEARCA:IHI), and the recent outperformance looks likely to continue in the days ahead.  Trump’s mention of Drug costs was thought initially to be a source of turmoil for the Healthcare sector, though recent efforts to help reduce regulation seem to be more positive than negative. This group’s improvement from the worst performing sector last year to a market leader this year IS in fact due to some mean reversion. That said, it looks to be ongoing as this group continues to show improvement.
Here’s a look at the Medical Devices ETF (IHI) – as of Jan 31:
In performance figures through 1/31, Healthcare was tied with Utilities (looking at SPX GICS Level 1 groups) for best performance in the rolling five day period, while being the 4th best performing sector out of 11 for January.
Overall, additional outperformance looks likely in the weeks and months ahead, and particularly in Biotechnology given the continued resilience in US Equities, as this sub-sector remains in much better shape than most other parts of Healthcare, despite last years decline.
US Dollar
The Decline in the US Dollar (CURRENCY:USD) extended to the lowest level of the year Tuesday, undercutting mid-Jan lows and hitting the lowest levels since early December.  It looks to be temporary given the bullish weekly and monthly structure, so dips should be used to buy, thinking that this pullback is nearly complete. Monday’s gains attempted exceeding resistance near 101 and failed, so now important for the Dollar to hold 99-99.45. Overall, a bottoming process should be in force for the US Dollar and movement back to highs to complete the 16.5 year cycle which could carry the DXY up to 110 into late Spring before a larger peak.
Thanks for reading.
Twitter: Â @MarkNewtonCMT
Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.
