Defensive sectors outperforming has been a theme for more than a month now, but what’s eye-opening is just how strong the runs in those sectors have been. This post is a quick run-through of the health care (XLV), consumers staples (XLP), and utilities (XLU) ETF charts.
Health care is the best performer in 2013. The 3 year daily chart shows that XLV is the farthest its been from its 200 day moving average (shown in black) in percentage terms since a brief period in the spring of 2011:
The sector has shown very strong momentum throughout 2013, and it has not traded below its 200 day moving average since 2011. All the signs of a very strong trend, though again, it is now quite extended vs. the past.
Consumer staples, XLP, is a similar looking chart, but with one important difference:
It broke its 200 day ma on a couple occasions in late 2012, indicating a long-term uptrend that is not as strong as the one in health care. But the price action in XLP in 2013 has been almost identical to health care, with strong momentum and no major pullbacks. XLP is also the most extended above its 200 day ma since the spring of 2011.
XLU is a different picture. Its recent strength belies longer-term relative weakness compared to health care or consumer staples.
XLU actually spent a few months below its 200 day ma in late 2012 / early 2013, and only recently broke above its high for 2012, set in the summer. It is the latecomer to the defensives party, and as such, I expect that utilities will be the first candidate to show weakness on a broader market pullback. In contrast, health care, though extended in the near-term, is the clear long-term leader among the defensive sectors (and the entire market for that matter).