Potential Mean Reversion in Health Care Providers

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Health care providers quickly went from hero to zero in the fourth quarter of 2018 after a failed breakout and bearish momentum divergence, but we’re beginning to see signs of a potential mean reversion over the short term.

Let’s start with health care relative to the S&P 500 – represented by the Health Care Select Sector SPDR Fund (XLV) vs. the SPDR S&P 500 ETF (SPY) – which has been unable to find its footing since topping five months ago. Prices have now retraced 61.8% of their 2018 rally, which may offer some short-term support and transition the trend from down to sideways.

All Star Charts/Optuma

The weakest subsector within health care has been health care

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