There’s been significant money flow shifts in the current environment, both between asset classes (from commodites into the stock market) and also in individual sectors of the broader stock market (from energy to technology and healthcare and others).  Let’s focus briefly on the price action in the Healthcare Sector (XLV) to see how rapidly price movements can shift and occur.

XLV Weekly Chart:

On the longer timeframe chart above, we see a double top pattern complete with a negative momentum divergence pattern throughout 2007, and an intense sell-off through the better part of 2008.  However, the tides have turned and funds seem to be strongly buying companies in this sector, as evidenced by the larger volume, positive momentum divergence, relative strength (vs. the S&P 500), and recent price swing up.

We appear due for a slight correction before the new weekly uptrend continues, but it would seem this could be a safe area, provided you stay on the sector level or diversified across various stocks, rather than concentrated in a handful in an industry (given that biotechnology stocks can be extremely erratic and surge or plunge based on clinical trial results or lawsuits).  Do be aware of recent examples like Elan Corporation (ELN) and Biogen Idec (BIIB) in terms of overnight surprises.

XLV Daily Chart:

The Health Care sector bottomed in June and has rallied almost 13%, which doesn’t sound too impressive, but the price movement has been in a steady 45 degree angle move up.  Right now we’re testing daily support via the 20 day EMA and 200 period SMA - note that we have indeed broken above the 200 day moving average, which many consider to be the ‘line in the sand’ in terms of trend or attractiveness.

Price made a new momentum high on this recent swing up, so we can expect continued strength following what appears to be a retracement move underway currently.

In terms of diversification, I’m including a quick chart courtesy FinViz’s Market Map of the performance of hte Health Care (and Consumer Goods/Staples, which has also experienced large positive money flow as well) of the past month.

From this, we see that Amgen (AMGN) and Merck (MRK) (along with United Health - UNH and others) have performend exceptionally well (increasing close to 10% each in a month), so these stocks may be worth further consideration.