The Dow Jones Transportation Average has been one of the best leading indicators for the direction of markets over the past few years. This index peaked in late 2014, six months before the S&P500 put in its top. The Transportation Average also bottomed out in January 2016, the month before the S&P500 finally made its bottom. Moving forward, we want to continue to give this index the weighting it deserves.
With the recent underperformance out of this group, let’s dive in and see what is going on underneath the surface. Is this the beginning of a major sell-off in Transports, which would lead the rest of the market lower? Or has this just been a correction within a strong uptrending market?