TORONTO (Reuters) - The slump this past week in mining and raw materials stocks, one of Canada's top performing sectors, is likely to be just a hiccup unless the global economy takes a long and lasting turn for the worse.

The materials index , which makes up nearly 20 percent of Toronto Stock Exchange's main S&P/TSX composite index, fell 4.9 percent in a holiday-shortened week, with Canadian markets closed Tuesday and US ones closed early on Thursday and all day Friday.

But the materials index is still about 17 percent above levels seen at the start of the year, and Ian Nakamoto, director of research at MacDougall, MacDougall & MacTier, said it is likely to remain a pillar of the Canadian market.

"We're in the area of selective commodity exposure," Mr. Nakamoto said. "Certain commodities will continue to do well and others are sort of languishing."

He said good profits will continue to attract money to the materials sector because of disappointments in other sectors. Fundamentals still look good for mining firms, but the "dark cloud is the sentiment toward the global economy".

"The doom and gloom, or the bears, took down the US and I guess that sentiment is spilling over into Canada," he said.

US markets fell into traditional bear market territory this week, described as a 20 percent drop from peak levels.

Andrew Martyn, portfolio manager at Davis-Rea, said the retreat in the materials index reflects many factors, including fears over a darker economic outlook and the soaring price of oil, which has lowered demand for many commodities.

"We're seeing an extremely narrow market breadth in Canada and the only thing really holding it up, or in positive territory of any significance, is energy and the materials index," he said.

"When you've got to search for liquidity, basic materials has some big-cap stocks in there," he added. "They're trying to raise cash to get some sort of defensiveness into this market.

Canada has stood out this year as a strong stock-market performer amid problems elsewhere in the world. The TSX composite hit a record high in June and even with the recent downturn, it remains 1.3 percent above year-end 2007 levels.

Michael Sprung, president at Sprung & Co. Investment Counsel, said that could be a signal for a downturn.

"The investors have been upbeat for a little longer than I would've expected given all the storm clouds that have been forming," he said.

"Therefore, I think for that the next number of months we're more likely to see things go down rather than up."