Dow Jones Transports are blocking a major rally
"Dow Jones Transports are blocking a major rally"
in the news Dow Jones Transports are blocking a major rally? What this all about..... See below.
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Sentiment Trader With stocks pulling back modestly as the S&P 500 and Nasdaq slip from their 7-day rallies, and one index will prove whether the rally still has legs: the Dow Jones Transportation Average.
We can notice that the group has been trading lower since its March 1 peak, which he attributed to the narrowing of the overall market rally as investors move to faster growing stocks.
Looking closely at the stocks that make up the transports index, we found a few key trends.
This is a classic case of the TRANSPORTS lagging, and NASDAQ rallying, but lets face it the NASDAQ is not skyrocketing like it should be. Here is why, you can see it on the chart.
Other leaders in the group are sparse. Southwest Airlines is up 21 percent on strong execution. Railroad Kansas City Southern and the embattled United Continental were the only other double-digit gainers.
The rest of the group lagged. Most of the airlines offered minor gains of 3 or 4 percent, while truck, freight, and logistics companies like J.B. Hunt and Ryder were down, some with double-digit losses.
"I find the action in this group disturbing, You remove CSX and Norfolk Southern and Southwest and you've got a group that confirms the bond market's advance, meaning interest rates going down, and not the stock market's rally — stocks going up. There are just too many negatives, with a total of eight down for the year. It's not a group that you want to own."
And while it can be uplifting to tinker with the group, replacing Ryder with competitor XPO Logistics for a 30-percent boost or removing rental car player Avis with its 40 percent downturn, the index offers clarity more than anything else.
History teaches us that you can't look through an index like that, and the only conclusion right now is that the Dow Jones Transportation index offers no solace for the bulls and without a re-acceleration, makes you feel that the rally isn't being confirmed by a group that I have always thought has to be appeased if we're going to get another leg up from here.
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