Founder’s Note: I’ve said it before and I’ll say it again: We’ve got the best team in the business here at TrendLabs.
When we want to go deep on a particular sector and the specific names driving price action, I can turn to Sam Gatlin.
Here’s Sam with an update on what’s happening in health care and biotech… and what we can do about it. – JC
By Sam Gatlin
Not everyone knows this about me, but I grew up in health care.
My parents weren’t investors or executives. They were operators.
My dad was a pharmacist at a Kroger pharmacy before deciding to take a risk and start his own independent pharmacy.
My mom, who had been a nurse, became the store manager.
Together, they built something from scratch, side by side, long before I ever thought about markets or charts.
That pharmacy worked. Really well.
Eventually, they acquired the largest local pharmacy in the area and grew into one of the dominant health care businesses in our part of rural Kansas.
I had a front-row seat to the pharmaceutical industry, the insurance system, and the realities of health care long before I ever opened a brokerage account.
I worked in the pharmacy, spending time with doctors, nurses, insurers, and people who live in this system every day.
I’ve seen what blockbuster drugs actually look like in the real world.
I’ve watched demand overwhelm supply.
And I’ve seen how fast things change once medicine actually works.
Investors Have Forgotten About Health Care
That background matters because the market has overlooked health care over the past few years as the public’s attention has been focused on AI.
I think that’s a mistake…
For decades, health care has been one of the steadiest secular uptrends in the entire market.
It’s defensive, innovative, global, and always in demand.
And yet, since peaking in 2021, the sector has gone essentially nowhere in absolute terms.
Investors lost interest, capital rotated elsewhere, and attention shifted to shinier objects.
This is precisely how major opportunities form.
On Tuesday, the the S&P 500 Equal Weight Health Care ETF (RSPH) quietly closed at a new all-time high:
Not the cap-weighted version, dominated by a few mega names; the equal-weight index, where participation actually matters.
After years of consolidation, RSPH is putting the finishing touches on a textbook accumulation pattern that looks eerily similar to other groups that have already joined this bull market late and violently.
Timing Is Everything
One of the biggest overhangs on pharma for years has been the looming “patent cliff.”
Investors have obsessed over it.
Analysts have modeled it to death.
Entire narratives have been built around how bad it might be.
But markets don’t move on what people fear forever.
They adapt.
What’s happening now is a wave of acquisition activity.
Just yesterday, reports surfaced that AbbVie (ABBV), a roughly $400 billion company, is negotiating to acquire Revolution Medicines (RVMD) for around $20 billion.
This is one of the largest biotech deals ever.
At the same time, Eli Lilly (LLY) has quietly marched into the rarefied air of trillion-dollar market caps, joining a club previously reserved almost exclusively for mega-cap tech.
Large pharma isn’t hiding from the patent cliff anymore. It’s buying growth.
And that’s created a raging bull market in biotechnology.
The S&P Biotech ETF (XBI), equally weighted across more than 150 stocks, saw short interest spike to the highest level since the COVID lows back in 2020.
That previous spike led to a 175% rally in one year:
This time, since the April low, XBI is already up nearly 100%.
And here’s the part people keep missing.
Even after months of gains, bearish positioning remains significantly elevated relative to history.
Shorts have covered, but not nearly enough. The squeeze isn’t over. Not even close.
At TrendLabs, some of our best trades in recent months have come from biotech.
Not because we have some special insight into drug pipelines or clinical trials, but because the setup has been undeniable.
There’s extreme mispositioning, broad participation, strong momentum, real catalysts, and real demand.
It’s an Industry Story
And the final chart seals it.
Looking at equal-weight biotech relative to cap-weight, the key intermarket ratio is on the cusp of entering a brand-new primary uptrend:
That tells you participation is expanding, not narrowing.
This isn’t just the big names dragging the index up. It’s everyone working.
That’s what real bull markets look like.
Health care and biotech have been consolidating for years, while the rest of the market has run ahead.
Now they’re catching up, and they’re doing it with force.
Everybody’s worried about what might go wrong.
I’m watching what’s already going right.
Health care looks like it’s finally joining this bull market.
And biotech appears to have unfinished business.
If you ask me, 2026 might be this group’s year.
Indeed, everybody’s wrong about health care.
Stay sharp,
Sam Gatlin
Analyst, TrendLabs