The Nasdaq Biotechnology Index: Longer-Term Technicals Are Beginning to Look Attractive

After approximately two years of underperformance relative to the S&P 500 Index, the NASDAQ Biotechnology Total Return Index’s (XNBI) longer-term technical indicators are once again beginning to look attractive.

On June 20, 2017, the XNBI’s monthly relative strength price chart (which compares its price performance to the S&P 500) crossed back above its 10-month moving average; which based on historical data increases the likelihood for a continued move higher for this industry group over the long-term time horizon.

As the chart shows, there were eight instances when the price crossed above its 10-month moving average. Subsequently, the XNBI tended to move higher over the next three-, six-, nine-, and twelve-month periods.

The recent relative strength moving average crossover for the XNBI/S&P 500 on its monthly price chart is providing an initial signal that the longer-term trend may be changing, which could result in the biotechnology industry further outperforming the U.S. equity benchmark. However, considering this long-term signal has only recently been triggered, it is prudent to consider waiting for further confirmation of a trend reversal prior to investing.

 

IMPORTANT DISCLOSURES

Past performance is no guarantee of future results. All indexes are unmanaged and cannot be invested into directly.

The opinions voiced in this material are for general information only and are not intended to provide or be construed as providing specific investment advice or recommendations for any individual security.

The economic forecasts set forth in the presentation may not develop as predicted.
Investing in stock includes numerous specific risks including: the fluctuation of dividend, loss of principal and potential illiquidity of the investment in a falling market.

Stock investing involves risk including loss of principal.

The Standard & Poor’s 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

The NASDAQ Biotechnology Index is a capitalization-weighted index of NASDAQ-listed companies classified as either Biotechnology or Pharmaceuticals by the Industry Classification Benchmark (ICB).

Because of their narrow focus, specialty sector investing, such as healthcare, financials, or energy, will be subject to greater volatility than investing more broadly across many sectors and companies.

This research material has been prepared by LPL Financial LLC.

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