Different Methods of Transportation

It is well-known by now that the transportation sector has been rather weak, on a relative and absolute basis. Adding credence to that notion has been the exceptional strength in FDX, by far the largest component in the IYT, transport sector ETF.

Although that may seem contradictory, as the strength in FDX should be a bullish factor, it merely illuminates how weak the rails and airlines have been as FDX has been toying with recent highs while the IYT flounders below what is now a declining 200-day moving average. 

With today's gap down in FDX, I am looking at $174, below, as marking a dividing line as to whether the recent breakout will hold, or instead will represent a tipping point of the bifurcation discussed above within the sector. We know the airlines and rails are rather beaten-down here, so perhaps a mean-reversion trade could materialize with FDX coming in while the laggards bounce.

But bifurcation is typically an ominous circumstance, and I would not rule out the sector taking another leg down this summer, especially with the what-me-worry attitude by many market players regarding the transports'  weakness this spring.