"The charts, as interpreted by Dan Fitzpatrick, suggest that the metals and mining stocks and the basic materials plays are headed higher, and even the energy cohort might be ready to turn soon," said the"If that's the case, then 2020 could be a very good year for this bull market — even as ... I am not yet a believer" in the energy stocks.
The metals and mining, basic materials and energy stocks are among the most cyclical groups in the economy, Cramer noted. With theAfter peaking in January 2018, the— the XME — fell almost 40% to bottom at $25.06 last December. The sector was under pressure from a slowing global economy and the Federal Reserve's fourth-quarter interest rate hike, Cramer noted.
Since then, Cramer said, Fitzpatrick examined what's called a flat triangle pattern in the XME's 200-day moving average, where the ETF set lower highs each time it rallied this year. That is until it broke past its moving average, a price action indicator, late last month."And within a few weeks, Fitzpatrick predicts that the shorter-term 50-day moving average will cross above the 200-day moving average," Cramer said.
"So, we've got the metals and the basic materials — two of the core components of an economic expansion," Cramer said. "When these groups are strong, you know that manufacturing's doing better than expected and there's pricing power for finished goods." The energy sector, however, has faced more troubled than the two other ETFS. Still, Fitzgerald is predicting the XLE, or the"It wouldn't surprise me if he's right" given signs that oil service stocks "may have finally bottomed," Cramer said. "Of course, a lot of people have been burned before, betting on a turn in energy … but then you'd have all three sectors going higher.
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