The Dow Transportation Index could not be more bullish at the moment. Right now it is signaling that a new bull market in risk assets could very well have started.
Here's why — see Figure 1:
Broken bear market downtrend
Head and shoulders bottom breakout
Resistance from the summer and fall highs broken
Uptrend confirmed with higher highs and higher lows
Transports are leading the S&P 500 higher (panel 2 in Figure 1)
Figure 1: Dow Transportation Index
Transports are historically one of the best performers during the early stages of the business cycle and they tend to catch a bid before the rest of the market. Figure 2 shows how Transports usually begin to outperform in the early bull phase of the market cycle — which is typically before the economic cycle has even bottomed.
Figure 2: Stylized Economic & Stock Market Cycles
In other words, the chart in Figure 1 is bullish for the stock market and the outlook for the economy.
— Brant
Disclaimer:The content provided on the Capital Notes newsletter is for general information purposes only. No information, materials, services, and other content provided in this post constitute solicitation, recommendation, endorsement or any financial, investment, or other advice. Seek independent professional consultation in the form of legal, financial, and fiscal advice before making any investment decision. Always perform your own due diligence.
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Chart of the Day: February 2, 2023
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Chart of the Day:
The Dow Transportation Index could not be more bullish at the moment. Right now it is signaling that a new bull market in risk assets could very well have started.
Here's why — see Figure 1:
Broken bear market downtrend
Head and shoulders bottom breakout
Resistance from the summer and fall highs broken
Uptrend confirmed with higher highs and higher lows
Transports are leading the S&P 500 higher (panel 2 in Figure 1)
Transports are historically one of the best performers during the early stages of the business cycle and they tend to catch a bid before the rest of the market. Figure 2 shows how Transports usually begin to outperform in the early bull phase of the market cycle — which is typically before the economic cycle has even bottomed.
In other words, the chart in Figure 1 is bullish for the stock market and the outlook for the economy.
— Brant
Disclaimer: The content provided on the Capital Notes newsletter is for general information purposes only. No information, materials, services, and other content provided in this post constitute solicitation, recommendation, endorsement or any financial, investment, or other advice. Seek independent professional consultation in the form of legal, financial, and fiscal advice before making any investment decision. Always perform your own due diligence.
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