Transport Sector Causes Problems for Dow Theory Bulls (IYT)
August 28, 2012 by Jon C. Ogg
Dow theorists may have a bit of a dilemma on their hands. The Dow Jones Transportation Average ($DJT) is not just down today. The index broke under the 50-day moving average and the 200-day moving average yesterday, and today’s lower levels likely will be interpreted as a confirmation of a broken chart. To add insult to injury, it was only recently that a golden cross was formed in the Transportation index chart as the price moved above the 50-day and 200-day moving average.
The iShares Dow Jones Transportation Average (NYSEMKT: IYT) shows this as well in the chart below.
The market’s rise is supposed to be confirmed by the rise in transportation stocks. After all, how can there be a great recovery boom if goods (and now services) are not being shipped all around the country (or even the globe).
We would caution that this is a very old notion, and perhaps there are many more factors to consider now as the markets are global and as the services sector now rules the roost.
That being said, it is probably worth watching. If transports break down, the media will start giving this more and more attention.
JON C. OGG
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