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After bottoming in early August, the US dollar reversed its bearish head and trended higher amid a fresh batch of better-than-expected economic data. The US dollar plays an important role in the material sector. A stronger dollar is bad for the material sector because it hampers the exports of the material sector, while a weak dollar is a good sign for materials stocks. The PowerShares DB US Dollar Index Trust (UUP) fell 8.3% while the Materials Select Sector SPDR Fund (XLB) rose 9% YTD. Below is an update look at a trade in XLB.

The graphic below is from our “U.S. Market Trading Map”, show the near-term technical bias and trading ranges. As shown, the underlying is in a short-term bullish trend when the price bars are painted in green. The underlying is in a short-term bearish trend when the price bars are painted in red. The yellow bars identify period of neutral or sideways trading pattern. Additionally, the light-blue shading represents the short-term trading range. A move above or below that range is considered overbought (as represents by the red shading) or oversold (as represents by the dark-green shading). Readings above or below the red and green shaded areas are considered extremely overbought or extremely oversold.

Chart 1.2 – Materials Select Sector SPDR Fund (weekly)

Our “U.S. Market Trading Map” painted XLB bars in yellow (neutral). After a strong run of outperformance, XLB printed an important high in early August and trended lower. Money Flow measure held firmly above the zero line since the ETF reached an interim low in early 2016, indicating there was little selling interest. This is a bullish development, suggesting…Click here to read more.

You see, our trend-following system is very unique as it attempts to pick turns before others see them. Timing is everything and if you’ve applied our system correctly, you should have made a killing in any markets.


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