Material to the Bull and Bear Case

There has been a great deal of discussion about the weakness in the materials of late. My take, as you can see below on the daily chart of the XLB, ETF for the materials, is that we have a confirmed inverse head and shoulders bottoming pattern that has yet to come close to acquiring its measured move target, just above $42. As long as the $35.80 “neckline” continues to hold, as it did last week, I am resisting the urge to jump all over this sector as being a canary in the coal mine for the bears. Indeed, you almost get the feeling that bears are latching onto the materials as the crux of their argument going forward, which is a very dangerous proposition given the technical setup below.

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