Bellwether transport stock Fedex has risen dramatically in recent weeks, reflecting the improving outlook for economic activity.
UPS has enjoyed a similar surge, as has Deutsche Post AG (which owns DHL).
US breakout
The S&P 500 index followed through to confirm the breakout above resistance at 1300, signaling the start of a primary up-trend. Rising 13-week Twiggs Money Flow indicates selling pressure. Target for the advance is 1440*.
* Target calculation: 1300 + ( 1300 – 1160 ) = 1440
Nasdaq 100 shows a stronger breakout above 2400, with similar buying pressure reflected on 13-week Twiggs Money Flow. Initial target for the primary advance is 2600*.
* Target calculation: 2400 + ( 2400 – 2200 ) = 2600
Bellwether transport stocks, Fedex and UPS, reinforce the S&P and Nasdaq signal with new highs signaling a primary up-trend.
Always bear in mind that the primary up-trend rests on unstable foundations (private sector deleveraging offset by deep government sector deficits) and may not last much longer than the November elections.
Fedex & UPS
Bellwether transport stock Fedex displays a bear market rally with a target of 80. UPS is even stronger, having broken out from its trading range of the last 2 months to signal a re-test of its 2011 high. Not enough to indicate an up-turn but encouraging all the same.
Fedex heads South
Transport bellwether Fedex respected resistance at $70, signaling a down-swing to $55*. 13-week Twiggs Money Flow declining below zero indicates a strong primary down-trend. UPS (lime green) is also in a primary down-trend; reversal below its August low would confirm the Fedex bear signal. Declining transport stocks warn of shrinking activity levels in the overall economy.
* Target calculation: 70 – ( 85 – 70 ) = 55
Transport stocks warn of declining economic activity
Bellwether transport stocks Fedex and UPS are both in a primary down-trend, warning of a decline in economic activity.
* Target calculation: 85 – ( 100 – 85 ) = 70
Deutsche Post-DHL shows a similar drop of about 30% from its 2010 peak, indicating that European and international shipping are unlikely to fare any better.
* Target calculation: 12 – ( 14 – 12 ) = 10
Reminder: we’re in a bear market
Don’t be fooled by current month-end froth in the markets — into thinking that the bear market is over or that the early August plunge was a false signal. The S&P 500 Index has made little headway after completing a double bottom at 1200 despite average volumes indicating the absence of strong selling. 63-Day Momentum peaking below the zero line indicates a primary down-trend. Expect the bear rally to test resistance at 1250/1260 before a retreat to 1100. Breach of 1100 would find support at the 2010 low of 1000, but the calculated target is even lower*.
* Target calculation: 1100 – ( 1250 – 1100 ) = 950
The Nasdaq 100 performed better, clearing 2200 to complete a double bottom with a target of 2350*. Bullish divergence on 13-week Twiggs Money Flow indicates buying pressure. But this is a bear rally in the middle of a bear market, and further falls on the Dow/S&P 500 would drag the Nasdaq lower.
* Target calculation: 2200 + ( 2200 – 2050 ) = 2350
Fedex and UPS remain in a primary down-trend, indicating that economic activity levels remain poor.
