Health Care ETFs Garnering More Than Medical Attention

The bear has a mixed martial arts stranglehold on equities all around the world. Every sector, every region... with precious few exceptions.

For some odd reason, health care is coming back into vogue. And it'd be far too easy to write that one off to defensive maneuvering. After all, staples and utilities had done a better job at protection.

No... it's something in the medicine cabinet. Or perhaps it's something on the balance sheet. Either way, the singular segment above its 50-day moving average? Health care.

Over the last 6 months, we can see the reason for the shot in the arm. The drug developers in biotech, the manufacturer/distributors in pharma and the medical device makers in med devices have carried the lion-share of the load. (Review my recent column, "Drugs and Device Makers.")

Leading the pack is the ever-volatile S&P Biotech Spider (XBI). It's near a 52-week high, has a 6% gain in 2008, and is well above short-term (50-day) and long-term (200-day) trendlines.

It's taken the pharmaceutical companies a bit longer to catch the bug, but catch it they have. The Select Pharmaceutical SPDR (XPH) is flat on the year; yet, it too has worked its way above 50-day and 200-day moving averages. Even the medical device makers are above trendlines, sitting a mere 5% from 52-week highs.

Before we begin anointing health care ETFs as 2008 saviors, we might want to look at the broader picture. Both the Select Health SPDR (XLV) and the iShares Global Health Fund (IXJ) have double-digit 2008 losses. And while they've managed to climb back above short-term trends with drugs and devices, they're being held back by health care services.

Consider the iShares Dow Jones Health Care Providers Fund (IHF). It's down 31% YTD. Or the Powershares Dynamic Healthcare Services Fund (PTJ)? It's off by a ghastly 26%.

Apparently, a fair amount of sector rotation has been taking place. After a poor showing in 2007, drug stocks, as well as the health care sector at large, is receiving a well-deserved boost. Yet political uncertainty/probable reality may squeeze profit margins on many of the brightest drug companies. Medical device makers probably have the best shot at taking the regulatory heat, standing in the kitchen, and making profitable strides in 2008-2009.

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