TRANSPORTS HIT NEW HIGHS -- WHILE UTILITIES REMAIN WEAK

DOW TRANSPORTS HIT NEW RECORD...While looking through today's sector charts, I was struck by the differing performance between transportation stocks and utilities.   And that difference should carry good news for stocks in general.   Chart 1 shows the Dow Jones Transportation Average rising into record territory today.  It's one of the strongest parts of the market.   Stronger airlines are the main driving force behind today's rally.  Chart 2 shows the NYSE Airline Index rising to the highest level in a year.   Since transportation stocks are one of the more economically-sensitive parts of the market, their strength is usually a sign of optimism.   It's also encouraging to see the Dow transports and industrials in uptrends together.   Utilities, however, have been one of the weakest parts of the market over the past few months.

UTILITIES LAG BEHIND...Chart 3 shows the Dow Jones Utility Average trading well off its November highs and trading below a falling 50-day average.  Since utilities are one of the market's more defensive sectors, their weakness could also be viewed as a sign of optimism.   Utilities, which are often viewed as bond proxies,  may also be a casualty of rising bond yields.   Treasury yields are having another strong day today, which may explain why utilities are the day's weakest sector.

TRANSPORTATION/UTILITY RATIO IS RISING... Chart 4 plots a relative strength ratio of the Dow Transports divided by the Dow Utilities over the past few years.  It shows the ratio bottoming last spring and rising this week to the highest level since 2018.   That's normally a good sign for the transports and the rest of the market.