The Dow Jones Transportation Average recently entered into a period of seasonal strength. What are prospects this year?
According to Thackray’s 2011 Investor’s Guide, the Dow Jones transportation average has two periods of seasonal strength, from the end of February to the end of May and from Oct. 10 to Nov. 13.
The March to May period was profitable in 12 of the past 15 periods for an average gain per period of 7.9%.
The October to November period was profitable in 18 of the past 20 periods for an average gain per period of 5.5%.
Seasonality during the March to May period works because more goods are transported during this period after weather delays in January and February. In addition, more transportation is needed to serve the auto and home buying season each spring.
What about this year? Two major factors are influencing the industry this year: growing demand for goods as North American economies improve and higher fuel costs.
The recent disaster in Japan is expected to increase demand for the industry. More goods will be exported to Japan as its infrastructure begins to rebuild.
The industry for the most part has been able to pass on its higher fuel costs through fuel surcharges. The recovery this spring is expected to be exceptional following one of stormiest winters experienced in North America during the past decade.
On the charts, favourable seasonal influences appeared as scheduled this year. The Dow Jones transportation average began to outperform the Dow Jones industrial average and the S&P 500 Index at the beginning of March.
It is the only broadly based U.S. equity index that has moved higher since March 1. Short-term momentum indicators (stochastics, relative strength index and moving average convergence divergence) are recovering from oversold levels. Support is at 4,907. Resistance is at 5,307.
The easiest way to own the sector is to buy the iShares Dow Jones Transportation Average ETF (IYT/NYSE). They track the 20 securities that are part of the average. The management expense ratio is 0.48%.
Financial Post
According to Thackray’s 2011 Investor’s Guide, the Dow Jones transportation average has two periods of seasonal strength, from the end of February to the end of May and from Oct. 10 to Nov. 13.
The March to May period was profitable in 12 of the past 15 periods for an average gain per period of 7.9%.
The October to November period was profitable in 18 of the past 20 periods for an average gain per period of 5.5%.
Seasonality during the March to May period works because more goods are transported during this period after weather delays in January and February. In addition, more transportation is needed to serve the auto and home buying season each spring.
What about this year? Two major factors are influencing the industry this year: growing demand for goods as North American economies improve and higher fuel costs.
The recent disaster in Japan is expected to increase demand for the industry. More goods will be exported to Japan as its infrastructure begins to rebuild.
The industry for the most part has been able to pass on its higher fuel costs through fuel surcharges. The recovery this spring is expected to be exceptional following one of stormiest winters experienced in North America during the past decade.
On the charts, favourable seasonal influences appeared as scheduled this year. The Dow Jones transportation average began to outperform the Dow Jones industrial average and the S&P 500 Index at the beginning of March.
It is the only broadly based U.S. equity index that has moved higher since March 1. Short-term momentum indicators (stochastics, relative strength index and moving average convergence divergence) are recovering from oversold levels. Support is at 4,907. Resistance is at 5,307.
The easiest way to own the sector is to buy the iShares Dow Jones Transportation Average ETF (IYT/NYSE). They track the 20 securities that are part of the average. The management expense ratio is 0.48%.
Financial Post
Jon and Don Vialoux are authors of free daily reports on equity markets, sectors, commodities and exchange-traded funds. They also are research analysts for JovInvestment Management Inc. Reports are available at www.TimingTheMarket.ca and www.EquityClock.com. Follow up on Twitter@EquityClock.
