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Transports Lagging Amid Signs of Slowing Momentum

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Transportation stocks helped lead the market rally from October 2012 through March 2013, but since that time it's been a struggle on a relative basis.  Check out this relative chart:

TRAN vs SPX 7.20.13

Relative support resides near the 3.80 level in the chart above - a relative close beneath this level could be an additional warning sign.
 
The biggest problem for transports, however, is the sign of slowing momentum on the longer-term weekly chart.  The last two breakouts in transports have occurred with MACDs much lower.  While this guarantees us nothing, it certainly suggests the risks of remaining long this group are spiking.  Take a look at the chart:

TRAN 7.20.13

It's looking eerily similar to the summer of 2011 when transports rose to fresh highs in July with a nasty long-term negative divergence.  That evidence of slowing momentum eventually resulted in a significant selloff throughout the balance of the summer.  We may not see a repeat in 2013, but the warning is there nonetheless.
 
There's one component of the transportation index that has printed negative divergences in each of the last two summers and then subsequently lost 30% (2011) and 15% (2012) in the following three months.  It's set up in a very similar bearish pattern in 2013 and I'm including it as my Chart of the Day for Monday.  CLICK HERE for more details.

Tom Bowley
About the author: is the Chief Market Strategist at EarningsBeats.com, where he provides stock market education, guidance, and trading strategies using a unique combination of technical, fundamental, and historical analysis. Tom provides EarningsBeats.com members with four portfolios (Model, Aggressive, Income, and Value), all designed to beat the benchmark S&P 500, and a revolving Watch List of hundreds of companies reporting strong quarterly earnings (must beat both revenue and EPS estimates) and exhibiting technical strength as well. These companies comprise EarningsBeats' annotated Strong Earnings ChartList (SECL), from which Tom trades exclusively. Tom writes a Daily Market Report (DMR) for members to include an executive summary, market outlook, sector/industry watch, and trading ideas. Learn More
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