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Divergence of Transportation Sector From Broader Market Means

143 views  2012-09-25 00:18   Tagsxml  false 
In the article “Dow Jones Transportation Index Still Diverging From Broader Market; What It Means,” Mitchell Clark, contributor to Profit Confidential, reports on the significant divergence that has increased between the S&P 500 Index and the Dow Jones Transportation Index. According to Clark, this continued divergence represents a non-confirmation of the stock market’s most recent rally.

“The divergence became apparent mid-July, when oil prices recovered from their recent correction,” reports Clark. But Clark thinks the divergence is due to more than just higher oil prices; he believes it’s emblematic of a stock market that’s losing its momentum.

 Clark notes that the Dow Jones Industrials, the S&P 500 Index, and the NASDAQ Composite are up substantially already this year, and this doesn’t include dividends.

“It’s a very tough environment in which to make predictions about the stock market,” says Clark. “There are just too many unknowns out there, and that’s why so many dividend paying stocks, like those in the Dow Jones Industrials, have done well this year. All of the uncertainty is making stock market investors very conservative.”

As such, Clark argues that all eventualities for the U.S. economy and the stock market are possible going into 2013.

“The Federal Reserve continues to flood the U.S. monetary system with cash, and interest rates are artificially low,” Clark points out. “Economic news regarding the U.S. housing market is showing improvement, but overall employment is not.”

Clark does believe that corporate balance sheets are very solid at this time, and stock market valuations are reasonable.

“Near-term risks include the fiscal cliff in the U.S., the sovereign debt crisis in the eurozone, and geopolitical uncertainty regarding Syria and Iran,” reports Clark. “Financially, U.S. corporations have never been better.”

Clark concludes that the divergence between the Dow Jones Industrials and the Dow Jones Transportation Index is worrisome, and for the broader market to really advance, transportation stocks will have to accelerate.

Profit Confidential, which has been published for over a decade now, has been widely recognized as predicting five major economic events over the past 10 years. In 2002, Profit Confidential started advising its readers to buy gold-related investments when gold traded under $300 an ounce. In 2006, it “begged” its readers to get out of the housing market...before it plunged.

Profit Confidential was among the first (back in late 2006) to predict that the U.S. economy would be in a recession by late 2007. The daily e-letter correctly predicted the crash in the stock market of 2008 and early 2009. And Profit Confidential turned bullish on stocks in March of 2009 and rode the bear market rally from a Dow Jones Industrial Average of 6,440 on March 9, 2009, to 12,876 on May 2, 2011, a gain of 99%.

To see the full article and to learn more about Profit Confidential, visit www.profitconfidential.com.

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