[TSP_Strategy] Re: Dow Jones Transports

 

A good sign, but does it have the same meaning as it used to.  When America was still primarily an industrial economy and transports carried those manufactured goods, it made sense transports would lead.  Healthcare and Technology dominate the markets these days - Obamacare and international iPhone sales.

One wonders if the effect of the oil shale industry and online sales on the Dow Jones Transports has negated the same early signal of strength or weakness for the overall US economy and the rest of the stock market.  Online sales are good for transport, but cannibalizing other retail sales and come with lower profit margins.  

Oil shale is a narrow industry that had out-sized effects on transports the last five years. A couple of railroads made a killing being the only way to deliver oil shale to refineries in the south.  The DJT pulled away from the DJIA when oil prices rallied and peaked with the price of oil and corrected with oil prices and bounced with oil prices.

The Dow Jones Industrial Averages (which is not so industrial anymore) is almost exactly where it started 2015 and the Dow Transports is down over 11% over the same time.  The Dow Transports are still bouncing with oil, but it is not leading to the upside by a wide margin.  Maybe that is the bigger signal.

I tend to believe the market's distortions from extreme monetary policy have trumped many market timing signals to include economic ones.  The unwinding of those distortions will be painful.  This can happen even if the economy and corporate revenue growth rates pick up since this would create inflation pressures on interest rates.  It would be even uglier to see inflation pickup without much growth - a possibility next year.

Distorted markets are not so easily predictable.  The markets are very distorted today.  I used to follow Dow Theory, but today I am not sure it matters anymore.  Monetary policy and interventions are in the driver's seat for now.

Michael 

TSPsmart.com

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Posted by: michaelhbond@yahoo.com

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