Transports Chugging Higher

I just got back from a trip to South Dakota and Colorado last week. The modern history of this part of the country dates to the middle of the 19th century and is built on the Indian Wars (my daughter reminds me we don’t call them Indians now), the Gold Rush and lesser well known, the locomotive. The locomotive could make or break a small mountain town. Bringing supplies and allowing trade but also tying people together.

The Native American’s did not fair so well during that time, and the Gold Rush died out. But the locomotive remains an important aspect of economic empowerment in the west to this day. And the locomotive is also an important part, along with the rest of the transportation sector, to today’s stock market.

The chart of the Dow Jones Transportation Index above shows how the price has moved over the last year. After a good run higher to a top at an all-time high in January it pulled back. And it has languished in a mostly sideways motion since. Several touches at the 200 day SMA, all of which held up, confirm more of a bullish consolidation than a correction brewing. And with the move off of the last touch in early July, the Transports are now running to test that all-time high from 7 months ago.

A new high would be very positive for the broad stock market. Dow Theory enthusiasts would then shift their focus onto the Industrials Average. This is still over 3% from its all-time high. A continued push from the Industrials to new highs would really stoke the broad market. But one step at a time.