Mark Hulbert: Dow Transports Lagging DJIA a ‘Worrisome’ Omen

Tuesday, 02 Apr 2013 07:56 AM

By Dan Weil

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While the Dow Jones Industrial Average hit a record high last week, the Dow Jones Transportation Average trailed behind.

“That is worrisome,” Mark Hulbert, editor of the Hulbert Financial Digest, writes in The Wall Street Journal. “The transportation sector historically has been a good leading indicator of both the economy and the stock market.”

For example, since the beginning of the year, the Dow Transports has gained 18 percent, compared with 11 percent for the Dow Industrials.

Editor's Note:
 
'It’s Curtains for the US' — Hear Unapologetic Warning from Prophetic Economist.

But the transportation index has lagged the Industrial index since mid-March. Last Monday, when the Dow Industrials reached an all-time peak, Hulbert notes, the Dow Transports stood 2.5 percent below its record zenith of two weeks earlier.

Richard Russell, editor of the Dow Theory Letters, is concerned. He cautioned clients last week: “It would not be a good omen if the transports were to break down,” according to Hulbert.

“If the transportation sector continues to lag behind the broader market, short-term traders might want to move to cash, and longer-term investors might want to consider taking some chips off the table,” Hulbert writes.

Dow Transportation aside, David McAlvany, CEO of McAlvany Financial, says stocks are ultimately headed down, as the market is trading on the basis of the Federal Reserve’s stimulus, not of the economy and earnings, he tells Newsmax TV in an exclusive interview.

“If you do a sampling of CEOs across the country you will find a very dark picture,” McAlvany says.

“If you look at insider selling, it’s been very aggressive for the last six to nine months, indicating that insiders in corporate America don’t see a bright tomorrow. So what is driving asset prices? It is cheap money from the Fed.”

Editor's Note: 'It’s Curtains for the US' — Hear Unapologetic Warning from Prophetic Economist.

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