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As you know, I have been discussing the notable divergences in the transportation stocks relative to the senior indices for over two weeks now, with the IYT pinned below its 50 day moving averge while the S&P 500 sits at fresh 52 weeks highs. Headed into this week, I have urged all members of the 12631 Trading Group (a premium service available only to members of The PPT), to closely watch Union Pacific Corporation. I believe this key railroad company has a daily chart that best exemplifies the essence of the current divergence.
Will we see another leg lower in this correction, or is it already over? Should this pattern break down, I expect the next leg will be swift and painful. Regardless, I believe that a resolution is coming this week, one way or the other, and will have broad market implications.
I should also add that CSX should be watched closely too, as it accounts for roughly 7% of the IYT–Hat Tip: @gtotoy
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Good call – I’m wondering though – it took a lot for the banks to catch on to this rally as the trannies and emerging markets led us first, then the nasdaq. Isn’t it possible that we are seeing more of a rotation then a crack in the armor? How about how strong retail was this last week? How important are the trannies to this rally do you think?
It’s a good point, but the trannies have basically been flopping around for the past week. If they broke lower, I have to believe it will be too much for the broad market to overcome.
Thomson Reuters report from this evening mentioned how the railways are picking up Y-o-Y for Oil transportation – something to consider with volatile prices in that particular market, may transfer over to the rails.
Good looks Chess!
An old pic of 2 trains crashed together would have made a nicer image.
AOL could print a hammer reversal today.