Overtime
The case for global materials
Good morning,
The materials sector isn’t a big part of the US stock market. In fact, at 1.64%, it’s currently the smallest of the eleven S&P 500 sectors.
However, globally it’s a much more important part of many other countries’ stock markets, and it’s taken on an increasingly important role in modern geopolitics.
More relevant to us, the sector has investment potential. Yesterday’s Playbook highlighted setups in gold miners, XLB, Canada, and Australia, but today, we’re going to go even deeper.
We’ll review:
Top-down technicals for XLB
Focused ETFs
and top single-stock opportunities
XLB: State Street Materials Select SPDR ETF
Materials bounce off short-term support on Monday
The SPDR Materials ETF couldn’t hold a breakout early last week, but I want to remain positive here. XLB held short-term support at $52 on Monday; if it can turn around this week and get back above the 5-DMA, I like its chances to stick the next breakout. A conservative measured target would be $60.
XLB is a neutral tactical trend vs. the S&P 500
Trading in a four-month sideways range right near a flat 200-DMA. However, if we zoom out, there’s definitely the “potential” for a larger bottoming formation 👇
Flows are running a bit hot
They’ve cooled since the late-June extremes, but XLB has seen persistent inflows since February, so we can’t say that sentiment is a big tailwind here.
