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Here's one of the oddest things about this year's rally

Talking Numbers

One of the big stories this year in the market isn't the Dow Jones Industrial Average. It's the Dow Jones Transportation Average.

While the Dow Industrials are just about flat, the Dow Transports are up around 4 percent this year. Why does that matter to the overall market?

The relationship between the two averages is one of the oldest ones in the stock market, notes Ari Wald, head of technical analysis at Oppenheimer & Co. It's "great for confirmation of the long-term trend," said Wald, but it's a "very poor timing indicator."

Though he thinks the Transports are a buy, he is concerned that it's near its highs while the Industrials are not. However, he isn't ready to throw in the towel yet on the overall stock market. "For this to become a sell signal, both markets would have to move below their February level," Wald said. "We're nowhere close to that. On the other hand, if the industrials were to pop out to a new high, that would reconfirm the buy and start the whole process over."

Wald's enthusiasm for the Transport index has to do with its components. He likes the iShares Transportation Average ETF (IYT), which tracks the Dow Transports index, calling it "one of the best ETFs for exposure to the airlines group."

(Read: Traffic, revenue figure rise at American Airlines)

Dow Transports components Southwest and Alaska Air are both up 28 percent so far this year while Delta has gained a whopping 39 percent.

"I would buy IYT just for exposure to the airlines," Wald said.

But, Steve Cortes, founder of Veracruz TJM, thinks investors should be more selective than buying the whole index because Transports aren't just made up of airlines.

"I think transports are a bit ahead of themselves," he said. "Historically, if you look, transports tend to trade with commodities, which makes sense because a lot of what they're hauling is commodities. But, most commodities have been having quite a tough time, in particular the industrial ones."

However, there's one transport company that Cortes likes a lot: United Parcel Service. That may be surprising given that UPS is actually down more than 5 percent on the year.

(Read: Postal Service posts another quarterly loss)

"It has not participated so far with the IYT rally" Cortes said. "UPS has been a laggard. But, I think UPS is very attractive."

Cortes notes that UPS's dividend yield of 2.8 percent is higher than the current U.S. 10-year Treasury Note's yield. And, the company's business is primarily in the United States.

"It really dominates the U.S. market," Cortes said. "It's not incredibly global. I still have a lot of worries about international growth, particularly emerging markets. So, I'd rather stay more domestic and I think brown will work for you."

To see the full discussion on the IYT, with Wald on the fundamentals and Cortes on the technicals, watch the video above.


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