Health Care Flies High

While the S&P 500 is getting hit hard in the past few days (and especially today) largely thanks to weakness in Tech stocks, there has been one glimmer of light. The Health Care sector has been flying higher, now up 5.2% in the past three sessions alone.  After that move, Health Care is extremely overbought trading over 3 standard deviations above its 50-DMA. That is the first time the sector traded at least 3 standard deviations above its 50-day since July 21, 2023, and at the current level (3.08 st. dev. above), it is the most overbought since September 11, 2017.

Not only has Health Care gotten extremely overbought, it did so quickly. In fact, as recently as Wednesday, the sector wasn't even a full standard deviation above its 50-DMA. With an over 3% gain on Thursday, the sector finished over 2 standard deviations above its 50-DMA.  Since the start of our data in late 1989, there have only been a dozen times (including this week) that Health Care went from less than one standard deviation above its 50-DMA to extremely overbought in the span of one session. As shown below, the most recent of these was actually this past February, but before that, the last instance was all the way back in 2017.

While the size of the move in the past few days is large and the extent to which it has gotten extended is notable, perhaps the most striking aspect of the rally is in relation to the S&P 500.  As shown in the first chart below, Health Care's 1.3% gain versus the S&P 500's over 2% decline on the session on Friday is one of the largest divergences between the two on record. Factoring in the past three sessions, Health Care's 7.8 percentage points of outperformance relative to the broader market is second only to January 7, 2000 (when it outperformed by 10.5 percentage points).