There you are. The D-J Transportation Average, starting in 1998 has been down five
years in succession. If the Transportation Average closes this year below 2309.96 it will be an incredible sixth year in a row that the Transportation Average has closed lower (Transports are now about 2122).
The above statistics on the Transports are something that almost nobody, even any analysts, are aware of. Frankly, I’ve never heard of a major stock average that has been down five years in a row, much less six years in a row.
And the question – what does it mean? Let me put it this way – it can’t be bullish. Transports carry the goods, the merchandise from the factories to the wholesalers and retailers of the nation. Transports carry tourists and business travelers to points all over the US.
I used to get almost daily complaints from subscribers regarding the old D-J Rail Average. “The railroads are antiques, they are finished” complained subscribers. So in 1970 Dow Jones “fixed” the Rail Average. They added trucks and airlines and made it the Transportation Average. But now the Transportation Average is caving in, and I ask myself, “What does it mean?”
I believe it’s part of a process that may go down in history as one of the greatest of all bear markets. I take the incredible action of the Transports as a warning of things to come. This morning the D-J Transportation Average broke to a new low below its February 13 closing low — to its lowest level since October 9. This brings up the very important question – will the Dow confirm the breakdown of the Transports? To confirm on the downside, the Dow would have to plunge below its comparable February 13 low of 7749.96. If the Dow confirms by violating its 7749.96 low — be prepared for the Dow to test its bear market low of 7286.
As this is written (Monday) I note that the Dow has been extraordinarily resistant to breaking down. The Dow this morning is still 175 points above its February 13 low of 7749.96.
The bear market picture, sad to say, entails a lot more than the potential war against Iraq. Remember, the bear market started in 1999, when Iraq was not a question. A bear market problem, and a big one, is that the finances of the US are literally “unsustainable.” A study by a group of economists concludes that either government expenses must be cut drastically or revenues to the government must be increased by 20% to 38%. In view of this, all eyes should be focused on the dollar.
