DOW TRANSPORTS RESUME UPTREND -- WHILE UTILITIES CONTINUE TO WEAKEN -- TRANSPORTATION/UTILITIES RATIO RISES TO NEW RECORD
TRANSPORTS REACH FIVE-MONTH HIGH -- WHILE UTILITIES FALL ... The Dow Industrials exceeded their May high last week to reach the highest level in three months. And are higher again today. But today it's the transports' turn to lead the Dow family of stocks higher. Chart 1 shows the Dow Transports surging to the highest level since January. They're the strongest part of the stock market today. By contrast, utilities are the weakest. Chart 2 shows the Dow Utilities falling today to the lowest level in four months. That's due mainly to rising bond yields and the fact that investors are turning away from defensive bond proxies. At the same time, they're favoring economically-sensitive transportation stocks. That's a vote of confidence for the stock market. So is the fact that the transportation/utilities ratio has just broken out to a new record high.
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Chart 1
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Chart 2
TRANSPORTATION/UTILITIES RATIO HITS NEW RECORD ... Chart 3 shows a ratio of the Dow Transports divided by the Dow Utilities rising above its January high to reach a new record. That's a bullish sign for the overall stock market. The Dow Theory holds that it's a bullish sign for the market when the Dow Industrials and Transports are rising together. I think Mr. Dow would probably agree that a rising transportation/utilities ratio is also sending a bullish message.
