Weighs in on What Continued Divergence of Transportation Sector From Broader Market Means
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.
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.
“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.
“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.”
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.
Michael Lombardi, MBA, the lead Profit Confidential editorial contributor, has just released his most recent update of Critical Warning Number Six, a breakthrough video with Lombardi’s current predictions for the U.S. economy, stock market, U.S. dollar, euro, interest rates and inflation. To see the video, visit http://www.profitconfidential.com/critical-warning-number-six.
To see the full article and to learn more about Profit Confidential, visit www.profitconfidential.com.
