Wednesday, February 2, 2011

Transports Not in Synch with Industrial Average

One chart comparison I looked at today was the Dow Jones Transportation Index versus the Dow Jones Industrials Average. Yesterday the Dow Jones Industrials Average just broke out to a new cycle high. Meanwhile, the economically sensitive transport sector is lagging, and is still well of it’s it’s mid January high, with a much uglier technical chart. The transportation index is viewed as very economically sensitive, as the majority of the index is dominated by trucking, air freight, railroad, and airline names.

What I think is really interesting is the context of the underperformance. In the last few weeks, the US data has broadly been surprising to the upside. One would think with an accelerating US economic story, that the transports should be flourishing, not lagging. Of course, the world has gone global, and it may just be that this economically sensitive group is one of the first US markets that is acknowledging that the Emerging markets are targeting a slowdown, and any slowdown will likely reverberate through the developed world.