The Metals And Mining Sector Is Flashing A Secret Buy Sign [SPDR S&P Metals and Mining (ETF)(NYSEARCA:XME), Materials Select Sector SPDR(NYSEARCA:XLB)]

metals and miningThe last three years may have been great for stocks overall, but there’s one sector that has been absolutely punished – metals and miners. The ETF that tracks the Metals and Mining Select Industry Index SPDR S&P Metals and Mining (ETF)(NYSEARCA:XME) is down 40 percent since July 2011 while the S&P 500(INDEXSP:.INX) has rallied during that time frame. Three-quarters of the XME comprises steel, coal and consumable fuels, and diversified metals and mining.

While those industries have had a rough go the last few years, are the charts showing that things are about to get better for the sector? Ari Wald, head of technical analysis at Oppenheimer & Co. believes things are looking up for metals and miners. Using a top down approach, Wald said he selected the best industry in the best sector. That led him to the materials sector. Within that sector, “the industry that really stood out to us was metals and mining,” he said. “When looking at metals and mining versus the overall sector, what we like about it is that it’s been this huge underperformer over the past few years.”

Over the last two years, the SPDR S&P Metals and Mining (ETF)(NYSEARCA:XME) has been flat while the Materials Select Sector SPDR(NYSEARCA:XLB), the ETF tracking the S&P Materials Select Sector Index, is up 41 percent.

You can see the full “Talking Numbers” segment below:

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