There’s trouble ahead for the broad stock market. That’s the message the transportation stocks are sending…
The Dow Jones Industrial Average (DJIA) and the Dow Jones Transportation Average (TRAN) usually run in the same direction. In strong bull markets, both of the indexes move higher. In bear markets, they move lower.
Transportation stocks have moved lower lately. And that’s yet another caution sign for the stock market.
Take a look at this chart of the Dow Jones Transportation Average (TRAN)…
The recent rally in TRAN peaked in mid-February. It’s moved steadily lower over the past few weeks. In fact, the chart now shows a series of lower lows and lower highs – the definition of a downtrend.
More important, though, is the 9-day exponential moving average (the red line) has just crossed below the 50-day moving average (the blue line). This sort of “bearish cross” often indicates the start of an intermediate term downtrend.
The bearish cross that occurred last June led to a several-week-long period of choppy action in the transportation stocks.
The bearish cross in October, however, kicked off a severe decline – in which TRAN lost more than 20% of its value.
There’s no way to know how the recent bearish cross is going to play out. But, it is just another reason for traders to stay cautious on the market right now.
Best regards and good trading,
Jeff Clark
Reader Mailbag
Today, Delta Report subscribers reflect on holding cash, being patient, and a recent portfolio review…
Jeff, thank you for the excellent Market Minute last week about why we hold large portion of financial portfolio in cash right now under overbought conditions. I needed a confidence boost and reminder that, yes, I should be underperforming since we rose cash in 2700s of the S&P 500 and started to short in the 2800s.
It’s been disappointing, but I understand that to win the war we must be willing to lose ground some days, some months.
– Tim
Thank you, Jeff, for your portfolio review and waiting on recommendations update this morning. I appreciate your honesty, integrity and all that you do!
– Ryan
And Market Minute readers join the conversation…
Nice call, Jeff. Not easy to stick to your indicators when the markets move against you. Thanks for being the voice of reason.
– Steve
I really like your thoughts on market conditions each morning! I get other letters and they are all hard bullish… Their portfolios are pretty red now.
– James
Thank you, as always, for your thoughtful insights. We look forward to reading them every day. Keep them coming to [email protected].