It looks like the run-up in Basic Materials could be nearing the end. The PowerShares Dynamic Basic Material (ETF) (NYSE:PYZ) is showing a "Double Top" in it's chart pattern.
Scott Rubin over at Benzinga, thinks this could lead to a new recession:
The energy and basic materials sector have been absolutely crushed again on Wednesday, and the recent routs could be signaling that the U.S. economy is on the verge of going back into recession. Growth has been extremely disappointing, culminating in a GDP reading of 1.8% growth for the first quarter compared to 3.1% in the fourth quarter of 2010. This is causing considerable concern on Wall Street. Simply put, the recovery has been lackluster despite the rally in the stock market.
The Federal Reserve, while saying that it will end QE2 on time in June, but saying that it anticipates keeping a very accommodative stance on interest rates for the foreseeable future. The dislocations in the commodity markets, against this backdrop, appear to be premature and extreme. The price drops are not reflective of an outlook where the Fed stays with ZIRP and the global economy continues to grow at a healthy pace. In fact, it may be signaling that the market is becoming increasingly concerned about the prospects of another recession.
The PowerShares Dynamic Basic Material (ETF) (NYSE:PYZ) closed trading today up 2.3% at $39.13 a share.