Basic Materials (XLB) – The resource and materials sector only represents about 2.5% of the S&P but continues to show resilience on every pullback and a strong relative strength index of 57 now after RSI came back and reset. On the recent dip in XLB, it was merely retesting its former trendline breakout and held support at 84. The ETF is up +22% YTD and looks poised for new highs now after getting a 8/21 EMA bull crossover last week and back into its monthly value area. A move through 90 can see its first fib extension target at 92 and then the upper extension closer to 96. The weekly chart has bounced off its 34 week moving average and continues to trend from a longer term perspective after a summer time consolidation that paused the early 2021 big rally. Looking at the volume profile year to date, the VPOC has developed support near 82 and could not even pull back to the level recently before buyers came in. As long as XLB stays above this 82-85 zone it likely sees new highs the next month and eventually takes a run at the 100 round number in 2022.

The ETF’s top holdings are LIN, SHW, APD, ECL, FCX, NEM, DOW, DD, PPG, IFF, CTVA, NUE with the first 3 names making up about 32% of the index. The strongest charts in the space within bullish uptrends and strong RSI readings include LIN, SHW, MLM, DD, and CTVA. Many of the Materials sector stocks sport a lower beta than the overall SPX so if that trend continues with lower beta names outperforming into year end it should help the XLB continue showing relative strength. Back on 10/25, XLB saw a large buyer of 3000 longer term January 2024 $76 ITM calls bought for 14.60, over $4.3M in premium which remain in open interest.