Rails on the Run:
Over the last one month period the industrials continue to lag, edging out the seemingly perennial laggard financials. In that time frame they have dropped 2.1%, and are only one of three major S&P sectors that fallen fallen during the last month (healthcare down fractionally). Transportation was a big mover Thursday as the IYT recorded its first 3 day winning streak in over one month. Lower highs are still in place since last September as the airlines have been an overall drag. A potential break above the downtrend in place on the ratio chart could be a nice welcome to drive the group higher, pun intended.
Looking at the chart below the first thing that comes to mind is hard landing. The airlines have weighed down the transports, but peering over the arena, one could make the case for an oversold bounce here. Will it be just a relief rally or the beginning of something substantial? One would have to go with the former until proven otherwise as the downtrend is still firmly in place. SAVE looks like a good risk/reward scenario as the gap from the 11/25/18 session was recently filled and it is trading just above the very round 50 number and upward sloping 200 day SMA.
Any stocks that one has in their portfolio that has not participated in the ramp up we have seen in the last 3 months since the late December lows so treat that name as a red flag. Below is an example of just that with the chart of GBX and how it appeared in our 3/13 Industrial Report. It is now lower but 49% from most recent 52 week highs, and has declined 17 of the last 24 weeks and this week is off by another 2% so far. This is certainly not a name one wants to go long with, but a cover of the short near the round 30 number seems reasonable as that could act as support dating back to October ’16.