Sunday, March 23, 2008

WTF Among the Healthcare Stocks?

Previous posts in this series have examined money flows in the Materials, Industrials, Consumer Discretionary, Consumer Staples, and Energy sectors. Here we're examining five highly weighted stocks from the healthcare sector, with Cumulative Money Flow (top chart) and Five-Day Flows (bottom chart) plotted against the Healthcare ETF, XLV. The stocks included in the analysis are PFE, JNJ, MRK, LLY, and AMGN.

Note that, unlike many of the other sectors, Healthcare shares have been quite weak during the recent market decline, dropping to new bear market lows. This weakness was preceded by steady dollar outflows from the sector: note the steady downtrend in Cumulative Money Flow. Not only is the sector weak; there are no signs at present of a sustained flow of funds into these shares.

Five-day flows have bounced a bit, but remain negative. Note how positive periods of five-day flow have not been sustained, often leading to subsequent price weakness. Of the sectors, this is one that is relatively weak, both in price performance and money flows.