The Transportation ETF Could be Important This Month | ETF Trends

The iShares Transportation Average ETF (CBOE: IYT), the largest ETF dedicated to transportation stocks, is up more than 9% just this month and that could prove to be good news given the historical importance of transportation stocks in November.

IYT seeks to track the investment results of the Dow Jones Transportation Average Index composed of U.S. equities in the transportation sector. The underlying index measures the performance of large, well-known companies within the transportation sector of the U.S. equity market.

IYT could be impactful this month due to the Dow Theory, which says the transports can be an accurate gauge on what’s next for the Dow Jones Industrial Average.

“From a historical standpoint, all may not be lost for Dow Theorists. IYT has been the ETF to own in the month of November, looking back 10 years. Specifically, the fund has averaged a healthy monthly gain of 4.72% — topping all but one ETF return on our list – and is one of just four ETFs to have settled November higher 90% of the time,” according to Schaeffer’s Investment Research.

Give Transports A Try

Some market observers believe trucking stocks, integral components of the Dow Jones Transportation Average Index, could prove surprisingly durable in a recession. The transportation sector is widely viewed as a gauge for economic activity since the companies transport the raw materials and goods that power the economy and manufacturing. That could be an assist to IYT and rival funds if railroad stocks dither.

IYT’s strong start to November is important for several reasons, including the fact that its late October price action saw the fund stumble and flirt with sell signals.

“Last Monday, Oct. 28, the ETF closed just shy of $195; run-ups to this area have, for the most part, acted as “sell” signals in the second half of 2019. Following the latest brush with the region, in fact, IYT subsequently went on a four-day losing streak — the longest since mid-September, which marked the fund’s previous test of this formidable hurdle,” according to Schaeffer’s.

Related: Why the Airline Industry Can Fly Above the Turbulence 

IYT’s next hurdle could materialize today: the $200 level.

“Beyond that, the ETF could once again stall in the $200 area. Not only does this region represent ’round-number resistance,’ but it’s also home to IYT’s annual high, touched April 24. In addition, the $198 area represents a 20% year-to-date gain for the shares,” notes Schaeffer’s.

For more information on Transportation ETFs, visit our Transportation category.

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.