Mark Newton, CMT, founder of Newton Advisors, returns to Real Vision to break down his technical view on the health care sector. He analyzes the momentum and relative strength and discusses how to make the play, in this interview with Jake Merl. Filmed on April 29, 2019.
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Health Care Starting to Bottom? (w/ Mark Newton) | Trade Ideas
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Transcript:
For the full transcript: https://rvtv.io/2V8MpMn
Welcome to Trade Ideas. I’m Jake Merl, sitting down with Mark Newton, president and founder of Newton Advisors. Mark, it’s great to have you back on the show.
Thank you, Jake. It’s great to be back.
So today, we’re going to be talking about health care. It’s no secret that this sector has been underperforming over the past few weeks and months. But recently, it looks like it’s starting to rebound. So what do you think, Mark? Is it time to start getting involved with health care?
Yeah, I like this sector quite a bit from a counter trend perspective. As you mentioned, it is a huge underperformer for the year. It’s the worst performing sector out of all 11 S&P sectors. It’s up only about 2.3% year-to-date versus an S&P return of about 17 and 1/2%. Its next closest peer, utilities, is up about 9%. So it’s down even more than 700 basis points under even the next worst performing sector.
Recently, you’ve started to show some evidence of health care bottoming out. And I think that’s what makes it attractive for me based on really three reasons. One is that technically speaking, you’ve gotten very oversold. And as of last week, you made the best returns out of any of the sectors that you’ve seen over the last week. So it was up almost 3% on the week. So as I mentioned, very, very bad performance on a year-to-date basis. However, the last week has actually been very, very good. So technically, we started to see a few signs of that bottoming and moving up to new multi-day highs. That’s a positive.
The second is that we’re approaching seasonally a very strong time for the group. So typically May through July tends to be a great time for health care. Particularly the month of July has been very good. It’s up six out of the last seven years. So it makes me think that we’re coming into seasonally a bullish time, and that’s also a reason to favorite it.
The third is from a pre-election standpoint, with Biden back in the race, a lot of people think that his stance towards health care is a little less extreme than many that are going towards the single payer model and really Medicare for All. So from what I’ve read and know from having heard him speak, I mean, it seems like he’s going to try to amend Obamacare and really roll with that as opposed to going to single payer.
So if anything, that should put less pressure on the sector if, in fact, he ends up being the candidate for the Democratic ticket. But I think the group in general has just gotten very hard hit. So a lot of it’s a mean reversion play on thinking the sector can show above average strength over the next few months.
So, Mark, what is it specifically about the technical setup that has you so interested?