The recent pullback in the the transportation sector-related exchange traded fund may have been temporary and provided a buying opportunity for some.
The iShares Transportation Average ETF (NYSEArca: IYT), which tracks the Dow Jones Industrial Average Index, dipped 0.4% year-to-date and is trailing the Dow Jones Industrial Average.
However, investors should not take too much stock in the year-to-date numbers as the transportation sector is on a long-term bullish trend, writes J.C. Parets for All Star Charts.
Since the fall of 2012, the Dow Jones Transport Average has more than doubled the Dow Industrial Average. Specifically, the Transportation Average has gained almost 80% since 2012, whereas the Industrial Average has increased about 35%.
Looking at a comparison ratio between the two indices, the Dow Jones Transportation Averages vs Dow Jones Industrial Average has formed a solid uptrending channel. Currently, the pullback in transports has sent the ratio toward the lower end of the channel but it is rising, with IYT up 3.2% over the past week, suggesting that some have are using the recent weakness as a buying opportunity.
The equal-weight transportation option, SPDR S&P Transportation ETF (NYSEArca: XTN), has fared much better, rising 4.2% over the past week and 1.1% year-to-date. XTN has also been attracting heaving inflows as investors capitalized on the strength in transports over the past few years. According to ETF.com, XTN has seen $544.1 million in net inflows since the start of 2013, bringing its total assets up to $658.5 million.
The transportation sector has greatly benefited from the boost in the domestic economy and increased demand for goods. Additionally, the area has capitalized on the plunge in oil prices, significantly cutting down costs. [Transportation ETFs: Airlines Landing on Higher Profits]
The following chart depicts the weekly ratio movement of IYT to SDPR Dow Jones Industrial Average ETF (NYSEArca: DIA).
For more information on the transport sector, visit our transportation category.
Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. 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.