Group Overview:

The industrials will often give you valuable clues to the genuine health of the real economy. Of course they transport goods, which consumers have purchased, so vital information can be had by monitoring the behavior of stocks in the group. Of course we still hear the Dow Jones Industrials which are anything but as “old tech” names have been added to the index over the years like AAPL, INTC, CSCO and MSFT. Some of the “real” industrials in the index, like BA or CAT, are like the rest of the market still trying to recover their recent wounds. BA the largest name in the price weighted index is showing signs or recovering after a nearly one year long sideways pattern, and more recently has traded between the round 300 and 400 figures. On its WEEKLY RSI it could be readying itself for just its second bullish MACD crossover in one year (the last one was short lived last October). This name has the most influence on the benchmark, being the highest price, and it is the most followed index in the world. So its strength, or lack there of, will have an affect on investors appetite for risk.  

Airlines Readying For Hard or Soft Landing?

The industrial space is very diversified, and even within the subsectors there is an assortment of names. Today we look at the airlines within the transports. To make the comparison to the overall market we look at a ratio chart of the JETS ETF to the S&P 500. Now with the abundance of ETFs, I believe there are now more ETFs than individual stock in the US, not all of them are great trading vehicles due to poor liquidity. But they do give a good overall sense of what is happening in the group. The JETS, although not a pure play on the airlines, does show the top 9 holdings as them with the top 5 being AAL UAL LUV DAL and ALK. The airlines did show solid relative performance during the turbulence in the major averages, pun intended, but they have weakened as late since the markets caught their nascent footing beginning on 12/26. The chart pattern has the look of a bear flag formation, and although I do examine strictly PRICE action, perhaps the behavior is telling us crude has a little more room to run on the upside.

Examples:

Continuing with the airline theme, below we take a look at a best of breed name in the field SAVE, and how it was profiled in our Industrial Report from 1/3. It is the ninth largest holding in the JETS ETF and perhaps there should be a greater weighting, as SAVE sits 9% off most recent 52 week highs. Contrast that to AAL, the biggest component in the fund at nearly 12%, that is now lower by 43% from its own most recent altitude. The softness in the JETS ETS was accelerated by the lower outlook for DAL on 1/3 which saw the stock plummet nearly 9%. Returning our attention to SAVE, it is one of the only domestic plays in an uptrend, and it has been comforted by its rising 50 day SMA since last summer, with a couple of brief exceptions that were quickly recaptured. It did successfully fill in a gap on 1/3 from the 11/26 session, and on a longer time frame if this name can get back above 60 in the near term, a level that gave it fits with resistance dating back to December ’16 and May ’17, it could be smooth sailing above.

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