The Trains Won't Stay Elevated All Summer

Lost in the shuffle amid the crypto infatuation, meme stock bonanza, resurgence in FANG/growth like FB, chips, and now biotechs like NTLA, is the relative and outright weakness in the transportation sector.

While I am sure most newcomers to the market since March 2020 (and perhaps others as well) will likely brush off any talk of "Dow Theory" and the transports being a fairly reliable "tell" at market infection points, the reality is that the lack of attention being paid to the weakness in the transports, as illustrated by an updated Dow Jones Transportation Average (the ETF for the transports is the IYT) daily chart, below, may very well prove to be the "doh" moment in hindsight. 

Specifically, if the well-defined support trend-line I have draw in light blue since the March 2020 lows is breached, I expect the Dow Jones Industrials to follow suit, and perhaps other sectors as well. 

At the moment, we have a market which loves to constantly rotate and re-rotate, thereby blunting the bears' best weapon of selling begetting more selling and eventually leading to a market-wide panic. Some call this dispersion or bifurcation, but that is essentially the gist of the current tape as we head towards the long holiday weekend. 

But after the long weekend (markets are closed on Monday), I will be keeping close tabs on the likes of FDX NSC UNP UPS, among many other transports including airlines. This is, indeed, a steep one-way trend since March 2020, after all, and breaks in steep trends would be rather important in any type of market, including a seemingly new paradigm.