Investors have seen a big move and outperformance from the Dow Jones Transportation Average (INDEXDJX:DJT) – they have broken out relative to the S&P 500 (INDEXSP:.INX). The transports are now on the verge of breaking out in absolute terms as well. And this is a boost for the stock market.
I wrote about the Transports bullish prospects early this week and believe that the Deutsche Bank (NYSE:DB) news is overshadowing this.
On Monday, I listed the Dow Jones Tranportation Average as one of my 5 bullish market indicators. Here’s what I wrote:
Transportation stocks have also made some headway of late in jumping back above a key trendline vs the entire Industrials group, which bodes well for Transports outperformance.
I think this is an important and bullish move.
We saw a big reversal of early weakness on the S&P 500, as the index climbed 30 points off early morning futures lows. This helps to erase the bearish effects of Thursday.
While prices now lie near upside levels of importance, the structure has taken on a much more bullish technical formation. And this should allow the stock market to move much higher. A breakout above 2167 should help the S&P 500 get up to 2200 and above. From a trading standpoint, I think it makes sense to lean long structurally and add on strength if the S&P 500 can hold above 2167. Of course, DB is the wild card into early next week.
That said, Financials outpaced all other sectors while Energy, Industrials and Staples also moved higher with strength. Market Breadth was also strong with volume flowing into Up vs Down stocks at a near 5/1 pace.
charts as of early afternoon Friday
S&P 500
Dow Jones Transportation Average
The price movement in Dow Transports relative to the S&P 500 has officially broken out. This should help this sector outperform. This could also foreshadow a move up to 8500 and higher on the average.
Thanks for reading.
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Twitter: Â @MarkNewtonCMT
Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.
