Materials were firmly rejected from that important long term level and have now spent the better part of three weeks regrouping.  We aren’t breaking through any time soon, but I believe based on this, and many of the daily charts, that you can buy this dip in materials with a close watch on the US Dollar.

The materials trade has not been one for the faint of heart.  It’s been a buy the dip market, traders playing breakouts have had their asses handed to them time and again, especially in the gold miners $GDX.  You’ve got to buy terrible looking patterns at their most bearish that stay within the intermediate term trend, which is up.  Remember that big big boys are playing in this space, and most mom and pops will lose money as their positions get whipped around.

The $USDX is threatening to break through the 200 day moving average which would be a very bullish sign for the greenback.  This is going to keep a cap on gold $GC_F and other materials, but I don’t believe it’s going to prohibit the materials sector from exhibiting strength.  This is of course unless the $EURUSD completely falls apart and we have a full blow European debt crisis on our hands in the form of a Greek default.  I don’t see this as likely.

I’ve posted below a bunch of charts from the materials space which are showing decent setups right now to the long side.  These come from my momentum watch list, but are not necessarily the strongest of the bunch, just the ones showing the best setups tonight.  Have at it.

ANR showed good strength today closing above the 20 day. I like the coal industry here as there is no chance in hell a clean energy bill is going to get passed, although I would like to see one. I think you can get long this name with a stop under today's low.

slammed into the 50 today but held, stochastics are in the basement, get long at the open with a very tight stop.

AUY hit the 200 day and bounced hard. That 200 day also represents an ascending trend line. You know the drill.

BUCY not in the materials sector but is very correlated. Great bull flag here above the 20 on light volume, get long and strong.

Backtest of the descending resistance line, looks real good here.

Very interesting pattern developing here, same triangular consolidation.

Trend line and 50 day, man up and buy the dip.

I don't see many great setups in the energy space, but this flag looks awesome, my favorite energy play right now.

Still in a big flag, buy the dip and run like hell on any further weakness.

Loving MEE here, nice wedge, nice trend line, get some.

Same chart as MEE.

Backtest of the breakout level, good support and on the 50 day, I'm adding to mine in the morning.

200 day, buy the dip, it looks ugly but it's the only way.

Nice flag above the breakout, going much higher.

Similar to PCX and MEE, I like it with a stop below the 20 day.

Pure momentum, love this stock, stop out below the 20 day.

I’m not cutting the tech exposure though until Thursday afternoon, at the earliest, before Intel $INTC reports.  I highly doubt they are going to let this sell off get rolling at least until that point.  In fact, I think you can step into some positions right here, while the $QQQQ is holding above that 20 day moving average, with tight stops and small position sizes.

I’m scared of the $MTL chart, I don’t like that failed breakout, and the steel industry components have run too far too fast.  I see more downside there.

The $XLB chart that I posted the other day was prescient.  It was rejected right at the area of long term resistance I pointed out.  That level won’t be taken out easily, it’s going to take at least a few weeks, if not a few months.

Action in the US Dollar $USDX will have a lot of say in how the $XLB components act.  I’m looking for a dollar rally now off the 50 day and bull flag put in.  I think everyone else is looking for the same thing, which is why there needs to be a shakeout.  Or maybe it just rolls over to new lows, that rejection from the 200 day may have been a major event.  Either way, listen to what the chart tells you, I have a view, but I won’t allow myself to have a bias, trade what you see.

I’m loving the healthcare sector right now, there are so many good names to dip into, but I won’t stash more money in those trends until I see tech really roll over.  I don’t think this is going to happen, but that’s my plan if it does.  I own $VRX, $CERN, and MHS in that sector, and stupidly sold out of $ESRX a few days ago.

I like $APWR and $URBN here, along with $CYH, $MOS is also giving you a good long entry if you don’t have cow shit exposure

We are now at a critical juncture in the materials sector $XLB, an area that has acted as both support and resistance on several occasions.  It’s amazing to think that the sector has now retraced the entire collapse from 2008.  I highly doubt we are going to just blow through this level, especially with the fact that the sector is extended on the daily time frame.  It’s time to take a rest which means you should start rotating out of those steel names that have been on fire.  If you have large positions that you’d like to hang on to, I would be selling some calls here to protect yourself a little.

Gold $GLD $GC_F found support at the 20 week moving average, above a critical consolidation area.  This is very positive action as major investors stepped in to support their earlier buys on the breakout.

I’ve added to my gold miner position last week by picking up $IAG and $RBY, I still hold a large position in $EGO.  I don’t think we take off from here, it’s going to take some time to regroup and work off the froth from November.  I’ve drawn on the chart what I believe to be the most likely path.  You have to accumulate the materials and underlying commodities on dips, do not chase the strength, it hasn’t worked.  Be patient, gold is going higher, my ultimate target is 1300 and as high as 1360.