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Battle taking place in Transports

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"As transports go so goes the economy?" That's an old axiom that many a market maven will quote. Right now, there's a battle royal taking place in the Dow Jones Transportation Average (TRAN) at the 200-day moving average. The point and figure chart is saying a bull trend is now at hand.

Dow Jones Transportation Average Chart -

The bar chart of the Dow Transportation Average is about as 50/50 as you can get. The 200-day MA is service as technical resistance. Bulls are hesitant to enter as MACD looks to be rolling over, yet signal has crossed back above MACD and could indicate another leg higher. A close above yesterday's high of 2,659 may be what it takes to get another leg higher going near- term.

Dow Jones Transportation Average Chart - $20 box

Today's brief trading at the $2,662 in the TRAN was enough to give this index a "double-top" buy signal on the $20 box chart. Support should be firming in the $2,480-$2,540 range and bulls have a bullish vertical count of $3,020 to begin further assessing risk/reward in the group and stocks they're looking to trade. In recent commentary, we've been more bullish on "trucking" stocks in the transportation sector. Recent profile from intra-day commentary was CNF Inc. (NYSE:CNF) as bullish near $31. CNF traded as high as $33.25 today, setting up a triple-top buy signal in its point/figure chart at $33. It is becoming apparent to me that some of the trucking stocks like CNF and J.B Hunt (NASDAQ:JBHT) are trying to lead, but need to see the broader Transport group confirm and break above their 200-day moving average.

Oil Service on the move

Not long ago, we pointed out a BIG wedge forming in the Oil Service Index (OSX.X). Today, we've seen a firm break above that wedge in the OSX.X at $81.50. Currently, the OSX.X is trading $83.70 after an earlier session high of $84.37. Our selection of a representative stock in the sector to be considering for bulls has been shares of BJ Services (NYSE:BJS) near $30. Today, shares of BJS have jumped back above its 200-day moving average and trades $30.65 (+5.21%).

Both the Oil Service Index and Transportation Index can be viewed as important "economic" sensitive sectors. Both are showing signs of bullishness, but still have some hurdles to clear for us to be thinking "full blown" economic recovery is underway.

Jeff Bailey
Senior Market Technician
Option Investor

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