Source: VantagePoint Intermarket Analysis Software
One of the stock market sectors that could be affected most by policy changes implemented by President Obama is the health care sector, making it a hot market that traders should be monitoring for trading opportunities.
• The Obama Administration has indicated that health care is a high priority so you know something will happen in this area.
• With the baby boom generation moving into its prime health care period, demographics certainly favor an overall bullish view from a demand perspective.
• Some of the most prominent drugs lose their patent protection in the next few years, opening the door to generics and prompting a flurry of merger/acquisition activity recently to prepare for this shift, as seen in Merck’s purchase of Schering-Plough, Pfizer’s bid to take over Wyeth, Roche Holding’s attempts to buy Genentech and numerous other smaller deals in the works.
• Which companies will be winners in all of this positioning is difficult to determine, making the health care SPDR exchange-traded fund (XLV) an attractive way to trade changes in this sector.
• Like many other stocks and ETFs, XLV has been sliding during the last month, dropping to levels not seen since 2001 and 2002.
• VantagePoint’s predicted medium-term moving average crossover spotted the start of the latest downtrend about a month ago (red circle).
• VantagePoint now is providing the first signs that XLV may be ready to turn as the predicted medium-term (blue line) and predicted long-term (green line) differences have turned up (arrow).
• More evidence is still needed, but with what is happening in Washington and with mergers and consolidation in health care companies – rumored or actual – watch VantagePoint’s neural index and predicted moving average crossovers for clues.
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