The Healthcare Sector SPDR ETF (XLV) surged 2.3% to reach new 52-week highs, generating an overbought signal with its RSI at 78. This marks a bullish trend since November, with only one decline since October, as the 200-day moving average begins an upward shift.
Brazil’s iShares MSCI ETF (EWZ) also experienced a 2.3% rise, hitting a 52-week high and registering an RSI of 78. The rally began in August, with the 200-day moving average rising and the ETF retesting the $29.00 level before advancing.
European Markets Overview
European markets, represented by the Vanguard FTSE European ETF (VGK), achieved 52-week highs amidst a bullish trend, reaching nearly $82.00. Despite bullish momentum, a bearish divergence in RSI suggests limited buying power, indicating potential for short-term profit-taking.
The S&P Biotech ETF (XBI) hit 52-week highs after a mid-August breakout, surpassing the $100 mark with strong momentum. Despite a bearish divergence in RSI at 67, short-term profit-taking is expected before targeting a $115 resistance.
The semiconductor sector, via the SMH ETF, remains strong despite a recent 2.2% dip, closing near $352.00. After reaching a high of $373.00 on October 29th, a rebound is anticipated, positioning the ETF for a move toward a $370.00 target by early December.
We are seeing the Healthcare sector (XLV) showing extreme strength, but the overbought RSI reading suggests a brief pause is imminent before it pushes higher. This bullishness is supported by a strong Q3 2025 earnings season for pharmaceuticals, where several large-cap names recently beat estimates and raised full-year guidance. For derivative traders, selling December put spreads with a short strike around the $145 level could be an effective way to collect premium while waiting for a more attractive entry point on any short-term weakness.
Breakout Trends and Trading Opportunities
The breakout in Brazilian equities (EWZ) is impressive, but its high RSI warns against chasing the current price. This rally is supported by recent strength in iron ore futures, which have climbed over 8% in the last month after China’s October 2025 industrial output figures beat expectations. We believe selling out-of-the-money put options with a strike price near the $31 support level for the December expiration offers a calculated way to gain bullish exposure on a pullback.
Europe (VGK) is making new highs, but we are cautious due to the bearish divergence in its momentum, where price is rising faster than buying conviction. This price action comes as recent data showed Eurozone core inflation for October 2025 cooled to 2.5%, increasing speculation that the ECB will signal further rate cuts in its December meeting. Given the conflicting signals, a patient approach of selling put spreads below the $80 psychological level seems prudent to take advantage of high implied volatility.
The biotech sector (XBI) has shown impressive relative strength, but it is also flashing a bearish divergence that suggests a temporary pullback is likely. The sector’s underlying strength was bolstered last week by news of a major acquisition in the gene-editing space, fueling speculation of further consolidation and highlighting deep value in the industry. We see an opportunity to buy December call spreads, such as the $110/$115 spread, if XBI pulls back toward the $108.50 support level as anticipated.
Semiconductors (SMH) remain the market’s clear leader, and the recent dip from its October 29th high appears to be a healthy consolidation rather than a trend reversal. This view is reinforced by the latest Semiconductor Industry Association report, which showed global sales in September 2025 grew 15% year-over-year, largely driven by demand for AI infrastructure. We would use any weakness toward the $350 level to initiate bullish positions, likely through buying December call options that target a move back toward the $370 resistance.
