Materials sector performance
The materials sector (XLB) gained 18% from the low of $37.28 on January 25, 2016, as of March 23, 2016. The materials sector includes stocks in the chemical industry, the metal and mining industry (XME), and the construction materials industry. The top holdings of the XLB include Dow Chemical (DOW), DuPont (DD), and Monsanto (MON) with weights of 11.5%, 11.2%, and 8.3%, respectively.
The metal and mining and chemical industries’ main export destination is China. Recently, China has taken some steps to stimulate its slowing economy through monetary policy intervention and a changing focus to a consumer-spending economy from the export-oriented and investment-based economy. These measures have helped the material sector to recover from its lows. The weakening of the US dollar (UUP) also helped to boost commodity movement. However, XLB fell 1.2% on Wednesday, as the market came under pressure due to a fall in crude oil prices. Now let’s analyze what the moving average indicates for the XLB.
Moving average analysis of XLB
XLB is currently trading above its 100-day and 20-day moving averages. On January 4, 2016, its 20-day moving average crossed its 100-day moving average on a downward slide and XLB fell almost 19% between January 4 and January 25. As we noted earlier, when a short-term moving average moves below its long-term moving average, the technical outlook becomes bearish.
However, on March 15, 2016, the 20-day moving average crossed above its 100-day moving average, which is a bullish signal. Thus, we may see further upside for XLB.
To know more, please read What the Fed’s Softness Means for Energy, Commodities, and Financials.