Here is an excerpt from my most recent Weekly Strategy Session
The thesis with the lagging transports is simple–They need not summon the strength to lead the market going forward in order for the bull to survive. Instead, they must blunt downside momentum and show signs of stabilization.
By now, the weakness in lagging sectors such as the semiconductors and transports should be rather obvious to market players. The crux of the issue going forward is whether these sectors are portending further broad market weakness beyond the realm of a mere 3-5% broad market pullback, or rather they are simply laggards on the cusp of playing a bit of catch-up.
United Parcel Service is a dominant air freight firm in the transportation sector. Note the monthly chart below. We are looking to see if that major support trendline dating back to the 2009 bear market bottom holds. The bulls should step in to support this major player in not only the transportation sector, but the broad market as well.