Monday, October 26, 2009
The Dow Jones Transportation Average ($TRAN), for those who follow the Dow Theory, fell 5.4% for the week and was particularly hard hit on Friday....and it's down today!
Two of the three railroads in the $TRAN reported earnings and while the bottom line numbers were impressive, investors were spooked by substantial revenue declines. Burlington Northern Santa Fe (BNI) reported a quarterly revenue decline of 27% from the comparable quarter in 2008, while Union Pacific (UNP) reported a 24% drop in revenues for the same period. The weak revenue picture helped to push the $TRAN to a "DOUBLE TOP" formation.
While I am by no means a strict adherent to Dow Theory, I do think the transports are important to watch, particularly when they signal a different economic client than is being reported by the manufacturing sector. The transports will be an important sector to watch going forward.
*click chart to expand image