Caught Looking at Trannies

If this market is going to fail, like soooo many feel it will, the Transports will begin to roll over signalling a soft economy ahead. This will be a major tell for me going forward and I feel the Trannies should be on everyone's radar.

Frankly the structure looks bullish to me on the Weekly charts. IYT appears to be consolidating an initial recovery rally following the 2015 bear market.

IYT

If the Trannies breakout to the upside from this monster base its going to be pretty tough to justify a bearish outlook for the market. The 20 Week SMA is now rising and below price, cupping the pullback; often this is a bullish posture and leads to higher prices.

Drilling down into some of the individual Transport positions can give us a further hint to how this base may ultimately resolve.

The largest holding for IYT, accounting for 13% of the ETF, is FedEx (FDX) which recently reported a stronger than expected quarterly earnings report which sent the stock higher by 8% at the end of September. Since then the stock has used the last 4-weeks to consolidate those sharp gains and last week tried to resume higher from a bullish flag formation

FDX

Truckers in particular look quite strong here as they are leading the group and breaking through large base resistance levels.

ODFL

KNX

Rails which make up a decent portion of the sector are pulling back after bouncing off the recent correction lows. They are the lagging group of the IYT and should be watched closely. A positive turn here could be just what the sector needs to catapult higher.

UNP

CSX

CSX is clearly in better shape on a Relative basis compared to UNP. Which will reflect the true move? We don't know yet, but this whole group needs to be at the top of our radars going forward.

Keep your eyes pealed for Transports to either break out or break down. The next move for this sector will likely set the tone for the market overall.

Thanks for reading
-ZT