We’re starting to see meaningful action in the materials sector, and XLB is shaping up as one of the cleaner ways to play it. After a quiet stretch, the ETF just posted a 2% gain on Tuesday, its largest one-day move since November 21. More importantly, that surge capped a three-day advance of 4.74%, the biggest three-day move since the April lows and the second-largest stretch going back to early 2023. For a traditionally slow-moving sector ETF, that kind of acceleration matters.
Zooming out, the recent rebound has carved out a well-defined bullish cup-and-handle pattern. Tuesday’s move pushed decisively through a key resistance zone, putting a live breakout setup in play. Based on the pattern, the upside target sits near 56. That may sound ambitious at first glance, but on a percentage basis it’s not unreasonable given how compressed the prior consolidation was. The setup suggests buyers are finally stepping in after weeks of basing.
That said, XLB has a reputation for short-lived momentum. Historically, follow-through in this ETF has often faded rather than extended, so sustained buyer interest will be critical. One encouraging sign is that the recent rally has already broken through two of its steeper downtrend lines versus the S&P 500. The longer-term relative downtrend, which stretches back to 2008, is still intact and remains an important hurdle. This isn’t a confirmed leadership shift yet, but it is a notable improvement from where things stood just weeks ago.
What makes this setup interesting is the historical context. From roughly 2000 through mid-2008, materials consistently outperformed the broader market, and that leadership persisted even after the major indices bottomed in the early 2000s. While there’s no signal that history is about to repeat itself, the current price action suggests XLB deserves renewed attention on an absolute basis.
XLB trades around $54, and the key question now is whether it can hold above its breakout zone and continue to build higher highs. If momentum sticks, this could turn into more than just a short-term pop. For now, we view XLB as a tactical buy tied to a clear technical setup, with the potential for further upside if buyers stay engaged.
