Keep Your Eye on the Transports
March 08, 2010 11:34 AM
It is a staple of “Dow Theory,” that the transportation index will show signs of where the overall market will trend, and rightly so; this market theory has been a reliable indicator for 100s of years. I am watching the IShares Dow Jones Transportation Average (NYSE: IYT) today because it came within $0.03 of its 52-week high and then came into some selling pressure.
The IShares Dow Jones Transportation Average has been leading the overall market over the past 52-weeks, up over 20% more than the Dow. One chart that I like to keep an eye on is the IYT against the SPY; frequently when the IYT converges with the SPY from the topside, this leads to a short term sell off and uptick in volatility in the S&P 500. This seems to be just one more metric that suggests too much complacency within the market right now.
