Stock Market Note

Sensitive materials prices comprise an economic leading indicator. Industrial commodities
composites present a challenge because of their price volatility week to week. But I map them
closely because they help substantially with bond trading and also because materials prices and
the materials sector stock composite (XLB) can sometimes be very helpful in trying to sort out
broad stock market direction in that they sometimes give you a little "heads up" on the market
overall.

There looks to be a test ahead for the materials sector. As you will see on the chart below, the
relative strength of the XLB as well as the narrow industrial metals group composite both face
resistance just ahead. Successful breakouts might well help support recovery of the SP 500.
(XLB). Failures at resistance could signal that more caution might be in order.