Key Takeaways
- SPX and QQQ rally stalled out but no evidence of trend change by 3/30 close. Consolidation is more likely than not over the next 2 weeks into mid-April.
- AAPL nearing January 2022 highs likely to serve as important resistance for Tech.
- Healthcare’s Wholesale Drug/Supplier group is one of the strongest areas within Healthcare right now and on the verge of an all-time high breakout to end Q1.
US indices stalled out Wednesday, though insignificant weakness with prices having closed above Tuesday’s lows, and the uptrend remains intact, for now. Various stocks within Technology like AAPL 1.96% are right up near prior highs from January, and should make follow-through difficult in my view, but we’ll await more evidence of the reversal. Interestingly enough, Small and Mid-Caps have both begun to rollover vs Large-Caps in the last week (IWM underperformed Wednesday and relative charts below illustrate the ongoing 13-month downtrend in IWM 1.50% vs ^SPX 0.40% ). This attempted to stabilize and bounce in February but is now rolling back over and MACD has crossed the signal line back to the downside. Large-Caps should be favored.
AAPL bounce now right near prior highs
One of the most important stocks of the entire US Stock market given its heavy percentages within SPX and QQQ is Apple (AAPL 1.96% ). AAPL makes up over 12% in QQQ alone, and comprises a hefty percentage of SPY, nearly 7% as of 2/28/22.
Given that AAPL rose for 11 straight days to levels right near prior peaks from January 2022 and is now slowing (Wednesday 3/30 broke this win streak for AAPL) it looks highly likely the entire Technology sector might be influenced by this stallout. Overall, this lines up with the FAANG composite I showed in yesterday’s report that illustrated how prices had rallied right into downtrend line resistance. Bottom line, while AAPL remains attractive on an intermediate-term basis within Technology, it should prove difficult for this recent rally to continue given the importance of former highs resting right near current levels.
Put/Call ratio down to Lowest of the Year = Speculation rampant
While sentiment had moved from bearish to Neutral, this latest Equity Put/call ratio on the CBOE is reason for concern for Bulls near-term.
This 0.41 reading is now the lowest for 2022. There’s been some bifurcation in sentiment lately as institutional investors have been hedging, but yet individual investors seem to be scrambling to buy upside calls.
Thus, while sentiment has gradually gotten more positive as Sentiment polls like AAII and Fear and Greed index have gotten relatively less negative, the Equity Put/Call ratio shows Call buying exceeding Put buying at more than a 2/1 ratio. Thus, overall it doesn’t seem like the 10% rally from mid-March has gone unnoticed.
Wholesale Drug Suppliers look to be the next part of Healthcare that are starting to exhibit real strength.
This Healthcare Sub-group, based on Investors Business Daily Marketsmith Charts industry ranking, is on the verge of pushing back to new all-time highs as of March’s close, with one trading day remaining in the month and quarter. Its strength ranking has continued to climb, and now ranks #14 per IBD’s 197 industry groups, up from #57 three months ago and up from #175 six months ago. Thus, this area is getting stronger and stronger, momentum wise.
Furthermore, while Healthcare has made good progress in its outperformance in recent months, much of this has occurred in the Pharmaceutical area, while Biotech has lagged measurably. The Wholesale Drug Suppliers, however, have just begun to push back to new all-time highs and this area should be a bullish area of focus for investors. Monthly charts below show this group in the verge of making a new yearly high in climbing above 2015 highs just as the month and quarter are set to come to a close 3/31/22.
Stocks like ABC, MCK 0.58% , CAH -0.13% , OMI -1.30% , are stocks which represent this group. While many might seem stretched on a daily basis, the act of surpassing prior peaks made back in 2015 is likely to help this group continue even higher in my view.
Overall, while the Pharmaceutical area was discussed as a key area of attractiveness within Healthcare, this area also stands out as warranting an overweight from a sub-sector point of view.
