TRANSPORTATION ISHARES HIT NEW RECORD HIGH -- DELTA AIR LINES CLIMBS TO HIGHEST LEVEL IN TWO YEARS -- FEDEX DELIVERS FIVE YEAR HIGH -- GATX CORP ACHIEVES A NEW RECORD -- PLATINUM REACHES THREE MONTH HIGH WHICH MAY LEND SUPPORT TO GOLD
TRANSPORTATION ISHARES REACHES NEW HIGH ... Since December, we've been writing about the strong upturn in transportation shares. A December 20 message showed the Dow Transports breaking out of a triangular formation which put them on track to challenge their all-time high. It also showed the DJ Transportation iShares (IYT) breaking through an important resistance line. Chart 1 shows the IYT now trading over 100 for the first time in its history. The relative strength ratio for the IYT (solid area) turned up during the fourth quarter (up arrow). I pointed out in December that upside leadership by economically-sensitive transportation is normally a positive sign for the market as a whole. Transportation leadership has been spread among the airlines, rails, truckers, and delivery services. The December 18 and 20 messages highlighted strong chart action in a couple of airlines (JetBlue and Southwest Airlines) and a rail (Kansas City Southern). Today's message will show three more transportation leaders.
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Chart 1
DELTA AIR LINES REACHES TWO-YEAR HIGH ... The weekly bars in Chart 2 show Delta Air Lines (DAL) breaking out to the highest level in two years (black circle). That puts the stock in position to challenge its 2010 high near 15. Upside volume has also been rising (green circle), which supports the strong price action. In addtion, the DAL/SPX relative strength ratio (below chart) has also turned up. That's a healthy combination of absolute and relative strength.
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Chart 2
FEDEX BREAKS OUT TO FIVE-YEAR HIGH ... The weekly bars in Chart 3 show FedEx Corp (FDX) trading over 98 for the first time since 2007 (black circle). That's an impressive breakout. Its relative strength line (below chart) is also turning up for the first time in two years. The weekly bars in Chart 4 put the bullish breakout in better perspective. This week's five-year high puts FedEx in position to start moving up toward its 2007 highs in the 115-117 range (see box).
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Chart 3
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Chart 4
GATX CORP HITS NEW RECORD HIGH ... The chart of GATX Corp is the most impressive of the three shown here today. The daily bars in Chart 5 show GATX (GMT) having cleared its October high to reach the highest level in a year. Its relative strength ratio (above chart) has broken out to the upside as well. But that's only part of the story. The weekly bars in Chart 6 show GATX Corp having also broken through its 2007/2008 highs the reach a new record. Its relative strength line (above chart) is rising as well, which supports the strong price action.
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Chart 5
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Chart 6
PLATINUM REACHES THREE-MONTH HIGH... Last Thursday's message expressed the view that strong auto demand was having a positive impact on palladium and platinum prices which were both starting to rise. Chart 7 shows today's $30 gain pushing spot platinum to the highest level in three months (arrow). The relative strength ratio (below Chart 7) shows the platinum/gold ratio breaking out to the highest level in nine months. [Today's spot platinum price of $1686 also puts platinum back above the price of gold which is its normal position]. New platinum buying may be enough to push the precious/industrial metal up to a challenge of its 2012 highs. The platinum chart has a bullish look to it. However, a bullish breakout through the horizontal line is still necessary to turn the yearlong chart from a sideways trend into a new uptrend. An upside breakout by platinum would most likely carry good news for gold. That's because the two metals generally trend in the same direction. Chart 8 shows the spot price of gold starting to bounce from its 62% retracement level measured from its May low to its October high (it's up $15 today). Gold is also finding support along its summer highs just above 1625. The yellow metal, however, still has to clear some resistance barriers to turn its short-term trend back up again. The first hurdle is its January 2 intra-day high at $1695. It also needs to clear the falling trendline around $1700.
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Chart 7
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Chart 8
GOLD BULLISH PERCENT INDEX STILL IN DOWNTREND... Whenever we look at gold, it's a good idea to check on the trend of gold miners. The orange bars in Chart 9 show the Market Vectors Gold Miners ETF (GDX) still in a downtrend, but trying to stabilize. The first thing the GDX needs to do to improve its short-term trend is to clear initial resistance near 47.50 (orange line). It also needs to see stronger chart action in individual gold mining stocks. The black line plots the Gold Miners Bullish Percent Index ($BPGDM), which measures the percent of gold miners in point & figure uptrends. That line has been in a downtrend since October. It needs to see an upturn to support any meaningful rally in the GDX. The BPGDM has been flat-lining at 31. It would need to rally to 38 to signal a possible upturn. Chart 10 shows why. The most popular way to track turns in the Gold Miners BPI is with a point & figure chart which is shown in Chart 10. The X column shows an uptrend, while the O column marks a downtrend. Each box is worth 2 points. In order for the current down (O) column to achieve a three-box upside reversal and start a new X column, it would have to rise to 38. An upturn in the GDX would support any potential upturn in the price of gold.
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Chart 9
