A Longer Look At Transports
Dragonfly Capital | Oct 19, 2016 08:54AM ET
In a world where the human attention span has crashed down to under 10 minutes, it is difficult to be patient waiting for a trend reversal to confirm. Heck, it is difficult enough to write this so you can read it in less than 2 minutes. But often that is just what it takes in the stock market.
The Transportation Index (NYSE:IYT) is a good case in point. With every failed 1 day move or strong one day gain emotions flare and strongly expressed opinions are dashed by the next day’s close.
Traders have been waiting 18 months for the Transports to pull themselves up out of a decline. It would be important for many reasons, broader participation with the market, Dow Theory confirmation to name a few. But it may be best to take away the noise of the day-to-day price action to see what is happening.
The chart above does just that. There is no daily or weekly price data on this chart. Just 4 moving averages. The shortest averages 20 closing prices and the longest 200 of them. What does it tell you? A couple simple things.
First, the arrows show 3 points where the shorter averages crossed over the longer ones. These marked changes in direction for the Index. The first at the start of 2013 led to a long run higher for the transports. The second marked the beginning of a pullback. And the third, this summer, marked a reversal to the upside.
How far will it go? There is no way to tell. But what is clear is that the Transportation Index has already reversed higher. Sure many will be happier with confirmation by a price move over a certain prior price point. But look at the moving averages. All are now lifting higher. Time to get on board.
DISCLAIMER: The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.
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