Rain is a Good Thing and So is Rotation

The XLB, sector ETF for a combination of chemical, materials, and especially ag-related plays, is often one of the more overlooked parts of the market, at least for the last few years. I can see why, of course, given the more enticing nature for other sectors and their appealing growth, particularly in tech.

But at this stage in the cycle we ought not dismiss the possibility of a rotation into the ag complex. Those who traded back last decade will recall the brilliant run-up in ag plays right into the heart of 2008, where name like Potash actually continued to print highs into the summer of 2008 even as Rome was burning around it. 

In other words, when the ags move, they tend to move with vigor and do not look back, as is the case oftentimes when commodities wake up from multi-year slumbers to a fresh bull run. 

On the XLB monthly chart, below, we can see the sector has been asleep since early-2018, threatening to emerge this month from the highlighted channel. We want to see a move at least over $60 sustain itself, with some individual names in the XLB like MOS NTR lead the charge, as well as smaller cap plays like IPI heating up as is the case this morning.