One facet of the “Dow Theory” is that any kind of rally in the Dow should be verified by a similar rally in the Dow transports. Now that the Dow transports has surged, what does it mean for exchange traded funds (ETFs) that target planes, trains and automobiles?

Tom Petruno of The Los Angeles Times states that in order to support the rally in the Dow, one must confirm a rally in railroads, airlines and truckers.  Additionally, the focus on transportation is relatively “old school” and is indicative of a belief that investors think shipping of goods is increasing and an economic recovery is in the offing.

Although this is good theory, last week’s earnings report from shipping giant UPS Inc. (UPS) indicated otherwise.  UPS reported a decline in profit of 49% driven primarily by a decline in shipping of daily package volume and lower fuel surcharges.

Relatively speaking, the sector has performed well so far this year. The  iShares Dow Jones Transportation Average (IYT) which is up 1.7% year-to-date, 14% over the last three months and resides above its 200-day moving average.

The Claymore/Delta Global Shipping (SEA) has fared even better, up 22.5% year-to-date.

For more stories on transportation, visit out transportation category.

Kevin Grewal contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.