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Market Search: If You Just Have to Be Long - Rails

June 28, 2008 11:59 AM

toytrain.jpgIf you just have to be long the market here, the rails should reverse before the market. They have a significant advantage over trucking with high oil, IMO, and if oil is going to hold these levels (and it appears likely) then the rails should fare far better than the market.

Historically, the transportation index has been looked at to lead the market (Dow theory). The reason for this has been simple. If the economy was doing well, then more goods would be transported and profits in that sector would lead the way. While I am always reluctant to say “it is different this time” as those are the 5 dumbest words in investment history, it is different now. Rails can ship cheaper than trucking with deisel at these levels. Therefore, while I am skeptical on the entire index because trucking is a part of it, rails should reverse prior to the market, IMO.  

IYT is the transports ETF. It was actually positive Friday. If you just “have” to be long here, the trade is long above $86.64. However, I believe any strength in the market is likely to be short lived, so I am not recommending any long trades here. Just want to provide commentary as you may not agree with me. 

Keep in mind, if we get more bad news, I believe we will eventually see mid 10,000 level on the Dow. So there “probably” is no hurry to say “all aboard” here.

Written by Tom@StockBlade.com · Filed Under General Investing/Trading Commentary 

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