We’re entering the most bullish time of the year for Health Care stocks. October and November have been the sector’s two best months since 1990, with average monthly gains of 1.6% and 2.5%, respectively.

We’ll see whether the month’s strong start can carry over to the balance of the year.

The Health Care Sector is near the bottom of the year-to-date sector derby. The benchmark S&P 500 index has risen 16.8% before dividends, but that gain hasn’t been broadly distributed. Health Care stocks are down 2%.

The problem isn’t really that Health Care is in a downtrend. The problem is there’s no trend at all.

Health Care stocks have caught a bid lately relative to the rest of the market. Since mid-July, the sector has outperformed the S&P 500 by 6%.

Unfortunately for Health Care bulls, the leadership has come not because of a surge in the price of Health Care stocks, but because growth stocks have been leading the S&P 500 lower in August.

The sector is still a hot mess, much like it has been for the last year:

Our job as technicians is to find trends, with the belief that trends are more likely to persist than reverse course.

One of the easiest ways to identify those trends is to look at a stock’s current price and compare it to the level and direction of a moving average of trailing prices. If the current price is above a rising moving average (MA), then prices are in an uptrend. Below a falling MA, a downtrend. Pretty simple, right?

Things are a little more difficult when you get mixed signals: the level says one thing, but the MA trend says another. What if price is above a falling MA? That’s key first step toward a new uptrend, but it doesn’t always mean prices have bottomed. The same logic holds for a price that’s below a rising MA.

So what do you call it when prices are directly on top of a flat moving average? We call it a bag of frustration. Or a hot mess. Or in this case, we call it Health Care.

We were reminded as we began our regular review of risk-off sectors that the majority of S&P 500 sectors are still in negative territory for 2023.

Information Technology, Communication Services, and Consumer Discretionary are each on pace for a banner year. Meanwhile, investing in any other space would have yielded a return substantially less than the benchmark index. Here’s how the sectors have stacked up since year-end:

The Health Care sector is near the bottom of the pile. It’s not so much because Health Care stocks are falling, but more that they just aren’t doing much of anything. The sector has been rangebound for 2 years now, stuck between the 161.8% Fibonacci retracement from the COVID selloff and the 2022 peak. Its current price is also sitting directly atop a flat 200-day moving average.

Much like action within the overall market, we’re seeing a handful of stocks performing well within the Health Care sector. Most names, though, are struggling to gain traction.

On the surface, not much has changed for the Health Care sector since we last checked in. Under the hood, we’re seeing some great opportunities.