This picture is exactly what I do not want to see as the stock market struggles to hold critical technical supports: a major index of economically-sensitive stocks confirming a breakdown of support at its 200-day moving average (DMA). The Materials Select Sector SPDR ETF (XLB) lost 1.3% on a day when the S&P 500 (SPY) only lost 0.3%. XLB also closed at a 5+ month low which added more confirmation to its bearish breakdown below its 200DMA. This picture is particularly troubling on a day when the Bureau of Economic Analysis (BEA) revised its estimate for U.S. fourth quarter annual GDP growth UPWARD from 2.5% to 2.9%. Investors did not seem to care and instead looked ahead to some future troubles.
The Materials Select Sector SPDR ETF (XLB) has declined 11 out of the last 13 days after confirming resistance at its 50DMA. The new 5+ month low further confirms a bearish 200DMA breakdown.
This trading action forced me out of a position in Vulcan Materials (VMC). For too long I watched profits evaporate in this sell-off. VMC broke down twice below its 200DMA and for good measure confirmed its 200DMA as resistance.
Vulcan Materials (VMC) lost 3.0%. The stock has not closed this low since October, 2016.
For good measure, I sold a long-standing holding in infrastructure play Fluor (FLR). The stock made a fantastic recovery since an 8-year low in August of last year. I am glad I accumulated shares in the sell-off. However, the bearishness in materials made me eager to lock in profits on a company that helps move a LOT of materials.
Fluor (FLR) topped out with the market in late January and is trying to hold support around the February low. For now, 50DMA resistance is the more dominant theme.
Allegheny Technologies Incorporated (ATI) deals in specialty materials. At an 11.3 forward P/E, 0.8 price/sales ratio, and a 1.7 price/book ratio, I think of this stock as a very cheap play on a strong global economy. I was looking to buy the stock here around its 200DMA, but the further breakdown in XLB put a pause on my plans. I am now staying on the sidelines to watch some more.