Activity in the transportation sector is a pretty good leading indicator of economic conditions generally (see “Why the Heck Is the Trucking Business Slowing Down?” wolfstreet.com) and transportation stocks often foreshadow the overall stock market. The Dow Jones Transportation average has been looking a little sickly since late last year. From Mark Hulbert, at marketwatch.com:
The Dow Jones Transportation Average is seriously lagging behind the broader stock market, and that’s potentially quite bearish.
Few people are focusing on this divergence, however, and fewer are even aware of it, especially as the stock market keeps hitting new highs. Another record occurred as recently as Thursday, though even then, the divergence was very much in evidence: Though the Dow Jones Industrial Average DJIA, +0.11% and the S&P 500 SPX, +0.08% each rose by more than 1%, while the Dow Transports DJT, +0.96% did less than half as well.
The divergence began late last November, when the Dow Transports rose to a record high. They are now 6.7% below their all-time closing high (and 7.6% below the intra-day high). Over the same period, the Dow Industrials have risen more than 2%.
You’d think that wide a divergence would grab investors’ attention, but you’d be wrong. Sentiment surveys, including those from the Hulbert Financial Digest, are showing high levels of bullishness.
http://www.marketwatch.com/story/an-important-dow-divergence-is-ominous-for-stocks-2015-05-15
To continue reading: An important Dow divergence
