RAILS AND TRUCKERS JOIN TRANPORT RALLY -- TRANSPORTATION ISHARES SURGE -- AIRLINE INDEX HITS THREE-YEAR HIGH -- TRANSPORTS PUSH INDUSTRIAL SPDR TO NEW HIGH

DOW TRANSPORTS CONTINUE TO RALLY ON FALLING OIL ... With oil falling sharply today, transportation stocks are continuing their recent surge. Chart 1 shows the Dow Transports gaining 2% and trading at the highest level in nearly two months. The TRAN crossed over its 50-day moving average on Friday. Its relative strength line continues to rise as well. In addition, Chart 2 shows that the fuel-sensitive group has been on a point & figure buy signal since 4700. [Please see my earlier article today on point & figure charting]. Although airlines have led the recent upsurge in the transports (and are doing so again today), several rails and truckers are joining in the rally.

Chart 1

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RAILS AND TRUCKERS CLIMB ... AMR and Continental Airlines are trading at multi-year highs and are the day's biggest percentage gainers in the Dow Jones Transportation Index. Rails are joining the rally as well. Chart 3 shows Burlington Northern Sante Fe gaining 4% and climbing over its moving average lines. The daily MACD lines are giving the first buy signal in three months. Chart 4 shows Union Pacific up 3.8% and nearing a test of last year's high. [Norfolk Southern is up 3.5%]. Truckers are bouncing as well. Chart 5 shows YRC Worldwide climbing back over its 200-day moving average on strong volume.

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TRANSPORTATION ISHARES JUMP ... One of the simplest ways to participate in the transportation surge is with DJTA Index iShares (IYT). Chart 6 shows it surging to the highest level in two months. Its relative strength (solid) line has been rising since the start of the new year (as oil has fallen).

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AIRLINE INDEX NEARS TEST OF 2003 HIGH ... The monthly bars in Chart 7 show the Airline Index (XAL) trading at a new three-year high and nearing a test of its 2000 high at 70.84. There can be little doubt that a peak in oil prices (see black arrow) is helping fuel the airline rally. One of the airline laggards is experiencing an upside breakout of its own. Chart 10 shows Southwest Airlines trading over its 200-day moving average for the first time in three months. Trading volume has picked up.

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RAILS PUSH INDUSTRIAL SPDR TO NEW HIGH ... Chart 9 shows the Industrials Sector SPDR (XLI) hitting a new record high today. Although it may seem strange, the XLI breakout is being driven mainly by rail stocks. That's because the XLI includes a number of transportation stocks. Four of the top percentage gainers in the XLI are transportation-related -- three rails and FDX. [Southwest Air is also included]. Just thought I'd point that out for those of you not familiar with the misleading labelling of the XLI. Another ripple effect of the stronger transports is a new record by the Dow Jones Composite Index, which includes all 65 Dow stocks in the industrials, transports, and utilities. Although the Dow Industrials are the only one of the three at a new high, the Dow Transports are showing the biggest gain.

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