The Dow Jones Transport Average index is the oldest of the two ( the other is the Industrials), at about 130 years (1884). It consists of 20 different stocks but only one survived that period, UNP or Union Pacific. The index is price weighted. Here it is on the left;

Now you will notice that both the DJT and the XLE dropped a lot, about 30 and 40 percent resp. only to regain their composure by both gaining about 50%. More importantly, the timing of the ups and downs are almost perfectly synchronised. This is extremely odd as “fuel” is a large input cost for any transport company, whereas it is a major output or revenue component for the energy companies. To find such a positive correlation – at least over the past 4 years – is downright amazing and contrary to most economic tenets. It is even more amazing as with walls all over the place and high import duties, taxes or whatever, you would expect less demand for transportation.

From an EW perspective both up moves from early this year look, for the moment at least, like B-waves. In the DJT that would have to be an irregular B-wave since it is making a new high. Looking at two components of the DJT, Fedex and Ryder we get the following;

Again both display a B-wave, FDX an irregular, and Ryder Systems a normal one. Both can, of course, still morph into something else but for the moment this is the best count and it does not bode particularly well. A closer look at UNP supports this outlook and, by the way, coal is one of UNP’s most important businesses.

These two charts are both of the Dow Jones Transportation Average, a.k.a. the rails. It consists of 20 companies in the rail, trucking , air transportation and parcel delivery business. Marine transportation is barely represented. As you can see at first blush, Janet Yellen is perfectly right to claim that there is no bubble or anything remotely indicating that markets might be overvalued. Looking at the arithmetic chart on the left, you can see that the DJT climbed almost 6000 points in the last 5 years. That is 500 points more than its entire one hundred and ten years existence!! Also, on both arithmetic and semi-log scale charts, the DJT is now well above its channel of the past 25 years!! However, long term maybe not;

The chart does not go to today but we are presently about where the X is at around 8000. Another 3 to 4000 points up is entirely consistent with the present 110 year old channel. All we will need is a constant flow of fed comments every two days or so for the next two or three years.