Guess what the best-performing on the nine sector SPDR ETFs has been over the past three days. Confirming that a cyclical rotation did in fact take place, the answer is the Materials Select Sector SPDR (NYSEArca: XLB).
Cementing the notion of a cyclical rotation, XLB’s industrial and discretionary equivalents rank second and third over the past 90 days, but focusing on materials ETFs might be the way to go in the near-term. [A Look at the Major Sector ETFs]
In addition to XLB, the iShares U.S. Basic Materials ETF (NYSEArca: IYM) is also worth considering. That ETF has returned almost 10% over the trailing three-month period and one technical analyst sees the potential for further upside.
“After forming a bullish reversal candle on big volume during the second week of October, IYM broke out to new 52-week highs on heavy volume the following week,” said Deron Wagner of Morpheus Trading Group.
IYM is up 4.6% since the start of October. The ETF has $762.3 million in assets under management and an annual expense ratio of 0.45%.
“On the shorter-term daily chart, a sharp move off key support of the 50-day moving average subsequently found resistance around $78, where $IYM has since been forming a bull flag type consolidation (a shallow correction by time, not price),” added Wagner.