Materials Sector Intrigue

This one was benefited as part of the Trump Trade before that bull in a China shop started breaking things in global trade. So ironically, Materials are now in the cross hairs of the trade tariffs food fight. I hold XLB short, as the position was taken to go with a long position in Specialty Materials company, CBT. I took another in a string of profits in CBT, but am left to wonder ‘bullish or bearish?’ about the Materials sector.

It would benefit relative to other sectors if today’s bump up in yields is substantive. It’s SMA 200 is still sloping up and its SMA 50 is starting to go that way again. A very short-term trend line is being tested today but the important line is below 58, and it is the underside of a Symmetrical Triangle. These are normally thought to be continuation patterns (i.e. pointing up) but there is a crappy looking little H&S pattern within it as well. So who wins, the Triangle and the moving averages’ slopes or the lousy pattern and the lame MACD & RSI?

xlb

The weekly chart shows the Sym-Tri with minor support at 54 should it break down. But the real major support area is down at 48, which would come about if the market takes a solid correction; i.e. a real one, unlike the nervous jitters that have marred 2018 so far. That could be the kind of correction you buy with both hands.

xlb

Anyway, here is daily CBT pulling back dutifully after I took profits on the latest upside spike. The questions are, will the short-term backdrop be conducive for Materials (i.e. yields and an intact broad market) and will CBT even care? It has been much more bullish than the Materials sector since April. I think I’ll buy back CBT and keep it against the XLB short and then lean which ever way the market instructs once XLB either breaks down or holds the Tri and pops. It’s a plan, anyway. The old ‘balance’ thing.

cbt

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