The “Power of the Pattern” suggested last week that Basic Materials ETF (IYM) was on Right shoulder support and that a quick 10% rally could take place. (see post here)

Last summer IYM looks to have created a “Bullish Head & Shoulders” pattern and once it cleared flag/pennant resistance line (1) a quality breakout rally (30%+ gain in a few months) took place.  IYM looks to be creating a similar pattern and is now testing the flag/pennant resistance, similar to last summers pattern.  Basic Materials/IYM continues to be a key Macro ETF to watch.  An upside breakout in IYM should be very good for this ETF and a good sign for the broad market, as it was on the breakout last fall.

How The Recent Decline In Stocks Looks "Eerily" Like Major Bear Markets Of The Past