A Real Foundation?

Looking at last week’s action, it seems counterintuitive in many ways. The S&P 500 was up 1.58%, led by materials, which has been on a torrid run, but they are so beaten down that no one –not even bottom-fishers want to believe this is anything more than a dead cat bounce (sorry, PETA). All S&P 500 sectors were higher save for utilities, which were essentially unchanged; that a reflection of the overall lack of confidence in the market and its underpinnings.

My focus is on consumer discretionary names, but there’s a chance this rebound in materials has a lot more room to the upside. The Materials Select Sector SPDR ETF (XLB) is up 10.9% in the last month, it has room for another ten-percent move on the chart.

The sector is comprised of various building blocks of our physical world and mining names:

• Aluminum
• Steel
• Gold
• Copper

Copper has been driven by the demands and whims of China, which has gone from manic to a deep depression. However, maybe the worst is over. I should make it clear that while the worst is over, it isn’t the same as roaring back; it is so oversold that a solid bounce would be big enough to make money for non-traders.

I am close to doing a fresh idea in the sector. In the meantime, we’re back to a new jobs report this week; buckle up boys and girls.