Ratio Chart Of Materials/S&P 500:

The materials have had a discouraging performance against the S&P 500, but a nascent run higher may be on the table. Below is the ratio chart compared to the S&P 500, and it broke a downtrend line recently, and has since pulled back to the breakout, and a successful retest would be the first step in another leg upward. The XLB ETF fell 22 of 27 session between 9/21-10/27 before reversing at the very round 50 number. It is still below both its 50 and 200 day SMAs and 15% off its most recent 52 week highs, and has the look of a bull flag formation, but doing that below those line makes it failure prone. The fund jumped 6.1% the week ending 11/2, its largest weekly move since the week ending 10/9/15 (volume was the third largest since the week ending 8/28/15). If its move can keep going, its next legitimate entry point would be above a double bottom trigger of 61.26 in a base that began the week ending 1/26/18.

Paper Cut, Pun Intended:

Within the diverse space of the materials there have been some really eye popping moves. Many of the subsectors within have a good pulse on the genuine health of the economy, so it was puzzling to see the likes of IP floundering in the world on 3% GDP prints. It currently sits 32% off most recent 52 week highs, even AFTER a 9% combined move during a 3 week winning streak the weeks ending between 10/26-11/9. Below is the weekly chart, which showed some real concern following a bearish engulfing candle at all time highs the week ending 2/2, slumping 4% in double average weekly trade. That was the start of a bearish WEEKLY descending triangle that aligned with the very round 50 figure. It now sports a very nice dividend yield of 4.4%, and bounced strongly off the round 40 number the last week of October. The weekly chart shows it hugging the 200 day SMA, which for the moment seems like a brick wall. There is a possibility of a second weekly hammer candle in the last 3 weeks depending on tomorrows close. A move above could be bought.

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