Sunday, April 29, 2007

XLV and Money Flows For Healthcare Stocks

Our last visit to the Healthcare sector found waning adjusted relative dollar volume flows leading to the late February/early March market decline. The Healthcare ETF (XLV; blue line) has moved sharply higher since that time, making fresh bull market highs. Flows (pink line) moved above average (red line), but not by as much as the price rise might suggest.

The five stocks highly weighted within XLV that I monitor for money flows are PFE, JNJ, MRK, LLY, and AMGN. Together, they account for over 45% of the index.

Over the past ten days, average dollar volume flows have been positive for all five stocks. There is no evidence of money systematically abandoning the Healthcare sector. Of the stocks, only AMGN is slightly below its 200-day moving average for flows; all the rest are displaying above average institutional interest over the past 10 days. MRK is the clear leader in dollar volume flows, with notable recent interest.

While the price rise in XLV is impressive, I'm not convinced that the recent rise has been attracting significant fresh capital. I will be watching carefully to see if this leads to some price consolidation among these issues.