Can Transportation Stocks Lead The Market Higher?

Last spring, the Dow Transports and accompanying transportation stocks began a steep decline. The drop was volatile, but transportation stocks were hit harder than the broad market indices.

As you can see in the chart below, the Transportation ETF (IYT) saw significant weakness – it fell almost three times as much as the S&P 500 over this time frame. This weakness lead transportation stocks to a critical support level (within a falling channel).

And since I like buying low and selling higher (good risk/reward opportunities), I alerted my premium followers of this opportunity. And later wrote about it here:  “Dow Jones Transportation Index Showing Signs Of Life“.

Over the past 6-weeks, transportation stocks (represented here by IYT) have bounced off support and show relative strength, outperforming the broad markets. In a role reversal, IYT has nearly tripled the gains of the broader stock market indices over this time.

The transports led the market on the way down, and are now leading the market on the way up.

Currently, transportation stocks (IYT) are attempting to break above a declining channel resistance at point (2) in the chart. $145 is currently the breakout level (note it has since fallen to $142ish).

I believe that what IYT does here (breakout or breakdown), may be an important market “tell” about the direction of the broader stock market (as well as transportation stocks).

transportation stocks transports chart breakout level march 24

Thanks for reading and have a great weekend.

Read more from Chris:  “Stocks And Oil Are Testing Resistance At The Same Time!

 

Twitter:  @KimbleCharting

Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.

 

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