ETF Trends
ETF Trends

Nearly 220 exchange traded funds hit all-time highs on Wednesday. By itself, that is an encouraging statistic for the broader market, but there is more to the story.

Two of the ETFs hitting record highs were the iShares Transportation Average ETF (NYSEArca: IYT) and the SPDR S&P Transportation ETF (NYSEArca: XTN).

That has some market observers believing a Dow Theory signal has been confirmed, potentially indicating that more upside is on the way for the Dow Jones Industrial Average. IYT follows the Dow Jones Transportation Average, which is used to assess the Dow Theory.

According to the Dow Theory, IYT may still plod along as the Dow Jones Industrial Average trades above key levels. The Dow Theory stipulates that if an upward trend in one of its industrial or transportation averages increases above a previous high, it is accompanied by a similar advance in the other index.

“According to the Dow Theory, IYT may still plod along as the Dow Jones Industrial Average trades above key levels. The Dow Theory stipulates that if an upward trend in one of its industrial or transportation averages increases above a previous high, it is accompanied by a similar advance in the other index,” according to the Wall Street Journal.

Transportation stocks were expected to benefit from lower oil prices and while that has been the case for airline stocks, other industry groups represented in IYT, including railroads, have struggled. Impressively, IYT and XTN are soaring as crude prices move higher.

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Perhaps more impressive is that transportation stocks are surging as the dollar does the same. Industrials could benefit because some members of the sector generate substantial portions of their revenue overseas. Transportation stocks are part of the broader industrial sector.

“The stocks of airlines, railroads, and shipping companies are thought to rise when the economy is on the upswing since they move the goods and raw materials that are fundamental to the economy. The economy is showing signs of strength near year end, with gross domestic product, the broadest measure of economic output, accelerating at its fastest pace in two years in the third quarter, the Commerce Department said last month,” reports the Journal.

 

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.