MW Here's a 'solid contrarian idea' for 2024, according to BTIG's Krinsky

By Jamie Chisholm

Critical information for the U.S. trading day

It's become very lonely being a bear on Wall Street of late. The stock market's rally to near fresh record highs has seen even the likes of Morgan Stanley's Mike Wilson recently admit the environment has become positive for equities.

Some technical analysts with a bearish bent also recognize the runes look favorable for the S&P 500 following the latest surge. For example BTIG's Jonathan Krinsky says the benchmark index may challenge 5,000 early n 2024.

But let's not get carried away. Krinsky adds he doesn't see another big upside move much beyond that level and if the tide turns he warily eyes initial support at 4,600, and with 4,200-4,300 as major long-term support.

Furthermore, he spies some concerning issues, such as an uptick in the CBOE VIX index VIX before the Christmas break, even as the market gained ground.

The VIX, an option-based gauge of expected S&P 500 volatility, tends to fall when the market goes up, so its rise may indicate some wariness bubbling below the surface.

It's a scenario similar to the market shakeouts witnessed in January 2018 and September 2020, Krinsky notes, and comes as broad market sentiment is chipper with investors' "positioning back near multi-year highs."

With this in mind, Krinsky appears wary of chasing sectors of the market that have already been big winners and has his sights on a sector he considers "a solid contrarian idea": healthcare.

As the chart below shows, the healthcare sector has meandered within a trading range for about two and a half years.

"An upside resolution from this range in '24 could be powerful and would suggest relative outperformance after testing 2021 lows," says Krinsky. "HC has only been the best performing sector in a year once over the last 15 years (2018), and while we can't say it will be the best in 2024, we do think it is worth a strong look for relative outperformance."

Within the sector, Krinksy notes that smaller companies, as represented by the Invesco S&P SmallCap Health Care ETF PSCH, has begun to break a nearly three-year downtrend relative to bigger companies, the Health Care Select Sector SPDR ETF XLV.

"Much like the broad market, we expect small-cap [to do better than] large-cap initially in '24," he says.

Those large-cap companies with what Krinsky considers are "constructive" charts but for which they do not have a rating include: AbbVie $(ABBV)$, Danaher $(DHR)$, IQVIA $(IQV)$, and Laboratory Corp. of America $(LH)$.

Small-caps with constructive charts and no BTIG rating include: Alkermes $(ALKS)$, Ensign $(ENSG)$, Fortrea $(FTRE)$, and Integer $(ITGR)$.

Companies with constructive charts and a BTIG buy rating include in Biotech: Ambrix Biopharma $(AMAM)$, Apogee Therapeutics (APGE), Biohaven $(BHVN)$, and Exelixis $(EXEL)$.

In MedTech: Abbott Laboratories $(ABT)$, Boston Scientific $(BSX)$, Inari Medical $(NARI)$, and Stryker $(SYK)$. In Life Sciences: Castle Biosciences $(CSTL)$, Natera $(NTRA)$, NeoGenomics (NEO), and SOPHiA GENETICS $(SOPH)$.

In IT & Digital Health: Apollo Medical $(AMEH)$, Progyny (PGNY), Sharecare $(SHCR)$, and Simulations Plus $(SLP.UK)$.

Finally, Krinsky looked at two of the best known healthcare companies: Pfizer $(PFE)$ and Eli Lilly $(LLY)$. Pfizer has had a rotten 2023, down 45% CHECK and is danger of falling for eight months in a row.

However, it's share price is now in an area offering what Krinsky considers is "major support" and "while it's not in the Dow any longer, if looking for a contrarian idea similar to the 'Dogs of the Dow', this one fits the bill.

Eli Lilly on the other hand doesn't look promising from a technical perspective, says Krinsky: "The stock is up seven years in a row and 12 of the last 13. Feels a bit parabolic lately with weekly momentum rolling over as the stock breaks its medium-term uptrend."

Markets

U.S. stock-index futures (ES00) (YM00) (NQ00) are mixed as benchmark Treasury yields BX:TMUBMUSD10Y nudge higher. The dollar DXY is softer, while oil prices (CL.1) dip and gold (GC00) trades above $2,075 an ounce.

   Key asset performance                                                Last       5d      1m      YTD     1y 
   S&P 500                                                              4,781.58   1.77%   5.08%   24.54%  26.39% 
   Nasdaq Composite                                                     15,099.18  2.17%   5.90%   44.26%  47.84% 
   10 year Treasury                                                     3.819      -6.80   -51.39  -6.03   -0.10 
   Gold                                                                 2,087.30   1.44%   1.52%   14.05%  14.57% 
   Oil                                                                  73.67      -0.35%  -2.57%  -8.50%  -6.40% 
   Data: MarketWatch. Treasury yields change expressed in basis points 

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The buzz

U.S. economic data due on Thursday include the weekly initial jobless benefit claims report, alongside November readings of the trade balance in goods, retail and wholesale inventories, all published at 8:30 a.m. Eastern.

Pending home sales for November will be released at 10 a.m.

Apple $(AAPL)$ is resuming sales of its smartwatches after court pauses FTC import ban.

The U.S. Treasury will auction $40 billion of 7-year notes at 1 p.m.

The Japanese yen $(USDJPY.FOREX)$ approached the 140 to the dollar level as investors eyed a shift to tighter policy by the Bank of Japan in 2024 and the cutting of interest rates by the Federal Reserve.

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-Jamie Chisholm

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December 28, 2023 06:34 ET (11:34 GMT)

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