With the potential for big infrastructure projects in the U.S. starting in 2018 (of course, it depends on political will but there seems joint interest, and anything can happen) we have to look to industrials and materials for the best plays in 2018.
Since the summer of 2017 metals have been a shining star, especially after a very rough start to the year. U.S. Steel (X) has been one of the best performers in a very big group of names. We think if demand for steel stays robust and pricing power is good, U.S. Steel is poised to make a good run in 2018.
There is concern that China continues to dump steel products on the market, weakening price levels and ultimately profits for U.S. steel producers. That was an issue in the early 2000's when President George W. Bush slapped a big tariff on importers, as steel prices had soared and profits were excessive. Stock prices for steel companies naturally moved aggressively higher to all-time highs, but that didn't happen for some time.
This year could be big for steel names and the charts indicate that could be the case.
The weekly chart of X, above, shows higher highs and higher lows, a very nice uptrend pattern. The 2017 high is in sight, but what's most impressive is the weekly relative strength -- the slope is steep. Meanwhile, money flow just went positive in December. This could last awhile as institutions wake up to this great story.