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Chart of the Day: Health Care, Consumer, and Utilities Sectors Rising to Unsustainable Levels?

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These ETFs and stocks are bid up day after day, and are leading the broader indices higher as well.

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It's the three generals of this market: health care, consumer staples, and utilities. These are the glamorous and exciting sectors of the new economy. They are bid up day after day, and are leading the broader indices higher as well. Even on a down day for the broader market (like today), all three sector ETFs are trading around unchanged.

However, the slope of their ascent has changed dramatically in 2013. It is getting to the point where the word "unsustainable" comes to mind.

Here is the Health Care SPDR ETF (NYSEARCA:XLV) weekly chart over the past three years:


Click to enlarge
Health care is by far the most extended ETF among the defensives, which is not surprising since it's the best performing sector in the US this year. But the slope of that ascent is getting unhealthy, especially when we consider that the ETF has not really had a down week in 2013 (a $.02 sell-off in February notwithstanding).

The Consumer Staples SPDR ETF (NYSEARCA:XLP) is a very similar chart overall, though it has not been quite as strong as health care:


Click to enlarge
The Utilities SPDR ETF (NYSEARCA:XLU) was weaker than both health care and consumer staples in prior years, but the 2013 ascent is almost identical:


Click to enlarge
XLU has gained almost the same in percentage terms in 2013 as it did in that previous two-and-a-half year period.

Putting the charts aside, I do actually think health care is one of the best sectors to own in this market from a fundamental valuation standpoint. But these moves are becoming unhealthy, so any reasonable pullback would signal weakness for the broader market as well. Look for these leaders to turn in order for any pullback to last more than a couple days.

This item by Enis Taner was originally published on RiskReversal.com.

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