Left Behind By The Rally
The old adage says roughly 75% to 80% of stocks follow the broader market. That means some stocks, or in this case, ETFs, will be left behind when we see rallies like the one we're seeing right now.
Historically, it's been a good idea to avoid these lagging sectors. In today's market environment, medical device makers certainly qualify as a laggard group and the iShares Dow Jones US Medical Devices ETF (NYSE: IHI) highlights this fact.
In the past month, the S&P 500 is up more almost 9%. What has IHI done? Nothing. The ETF is flat. This cannot be considered a good sign.
Plenty of ETFs have found their way to a new 52-week highs in the past week. Others are getting close and nearly all of the strong ETFs have reclaimed their 50- and 200-day moving averages. None of those descriptions apply to IHI, which is trading more than a dollar below both of those moving averages.
IHI is home to stocks like Boston Scientific (NYSE: BSX), Medtronic (NYSE: MDT) and Thermo Fisher Scientifc (NYSE: TMO), but that cannot be considered a source of attraction at this point. There's not much reason to be bullish on IHI here.
Lower highs and lower lows tell that story and if support below $51.30 doesn't hold, IHI is headed to the mid-40s.
