DROP IN OIL GIVES TRANSPORTS A NICE LIFT NEAR THEIR 2005 LOWS -- THE DOW TRIES TO CLIMB BACK OVER MOVING AVERAGE LINES
TRANSPORTS GET LEFT FROM OIL DROP... With crude oil dropping more than $2 today, transportation stocks are getting a much needed lift. And it's coming at a good time. Chart 1 shows the Dow Transports flirting with the late-April/early May lows ranging from 3350 to 3400. This has been the weakest of all the major stock indexes and what it does in this support area could tell us something about the state of the entire market. Although today's price bounce is encouraging, the recent volume pattern isn't. The recent price drop has taken place on noticeably heavier trading. We'll still have to see a more impressive combination of rising prices and volume to to negate the recent chart deterioration. The Dow Industrials are also benefiting from falling oil prices and rising transports. Chart 2 shows the industrials trying to climb back over moving average lines. It's too soon to tell if today's Dow bounce has any staying power. As with the transports, we'll need to see more upside follow-through -- and a more positive volume pattern -- to turn its short-term trend back up again.
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