The Drip Lower Getting Louder?

The industrials, earlier in ’19, had a firm hold on the top of the leaderboard with the 11 major S&P sectors. It has slowly descended and has now been leapfrogged by energy, and is now the third best group with real estate hot on its tail. We will soon see if the ratio chart below comparing the XLI to the S&P 500 can undergo a soft landing, with the steep recent decline. MMM the second largest component, has not been garnering much attention with BA and FDX smothering it, but if this name can CLOSE above the round 210 number (been above intraday 6 times since 12/1/18 but recorded just one CLOSE above 210) it could give the ETF a boost.

Transport Trickledown:

One would have to be living under a rock to not be aware of the softness in the transports lately. Sure FDX was the big news today, but airlines have had their share of disappointment. The rails have been holding up in a lukewarm fashion with names like CSX and UNP off by just 4 and 6% from their most recent 52 week highs. Their counterparts however are a whole different story. Rail part makers like RAIL, GBX and WAB are now 65, 43 and 37% off their most recent ascents. The reason for the shortcoming is unknown, but the PRICE action is speaking volumes. As always pay attention. 

Examples:

There has not been much to like in the industrial arena as of late, but if one searches they could find some relative strength. Below is the chart of FSS and how it appeared in our 3/7 Industrial Report. The stock is higher 4 of the last 5 weeks, with 3 of the 4 rising by more than 5, 6 and 7%. This week is higher by 1.5% and this is a good showing following the prior weeks gain of 5%. It is holding nicely above the double bottom breakout trigger of 24.64 on its WEEKLY chart. 

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