The Bullish Economic News from America’s Truckers

(This is an excerpt from an article I originally published on Seeking Alpha on August 29, 2015. Click here to read the entire piece.)

The iShares Transportation Average (IYT) began to diverge notably from the S&P 500 (SPY) in March of this year. It took another five months for this divergence to resolve into a notable breakdown in the S&P 500.


The iShares Transportation Average (IYT) appears to "predict" the breakdown in the S&P 500 with a 5-month leadtime
The iShares Transportation Average (IYT) appears to “predict” the breakdown in the S&P 500 with a 5-month leadtime

Source: FreeStockCharts.com

The divergence caught the attention of many technicians but after month-after-month of no consequence, this predictor seemed to fail. The divergence even seemed to come to an end in July with IYT staging an impressive comeback. The transportation index registered a 4.1% gain and traded above its 50-day moving average (DMA). The S&P 500 gained 2.0% that month. I guess the light bulb really does shine brightest right before it goes out.

Another divergence may be occurring WITHIN the transports. On Friday, August 28, 2015, Nightly Business Report included a segment covering America’s biggest truck “beauty pageant” in Dallas, Texas where the news on the economy was very bullish. {snip}


Over the last two recessions, trucking tonnage has probably served more to CONFIRM rather than predict recessions and recoveries
Over the last two recessions, trucking tonnage has probably served more to CONFIRM rather than predict recessions and recoveries

Source: US. Bureau of Transportation Statistics, Truck Tonnage [TRUCKD11], retrieved from FRED, Federal Reserve Bank of St. Louis, August 28, 2015.

{snip}

Trucking is undeniably critical to the American economy. NBR noted that nearly 3/4 of all freight in the U.S. travels by truck at some point along the way. The American Trucking Associations (ATA) notes that 69% of tonnage carried by all modes of domestic freight transportation goes by truck, with motor carriers collecting 80% of the total revenue earned by all transport modes.

{snip}

Trucking executives interviewed on Nightly Business Report were very bullish.

{snip}


Swift Transportation (SWFT) President and COO is bullish on the U.S. economy based on the freight his company sees
Swift Transportation (SWFT) President and COO is bullish on the U.S. economy based on the freight his company sees

Source: Nightly Business Report

{snip}


Covenant Transportation Group CEO David Parker is also bullish on the U.S. economy
Covenant Transportation Group CEO David Parker is also bullish on the U.S. economy

Source: Nightly Business Report

Perhaps inventory levels are so high specifically because retailers are anticipating very strong future sales.

{snip}



Be careful out there!

Full disclosure: long SSO shares

(This is an excerpt from an article I originally published on Seeking Alpha on August 29, 2015. Click here to read the entire piece.)

Leave a Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.