Transport ETFs Saying All the Right Things

Fans and followers of the Dow Theory will be excited to know the iShares Transportation Average ETF (IYT) touched an intra-day, all-time high Tuesday on volume that was nearly 21% above the daily average for the trailing three months.

“For technicians, the century-old Dow Theory states that both the Dow Transports and the Dow Jones Industrial Average need to make new highs on a closing basis to confirm that an uptrend has staying power,” Tomi Kilgore reports for the Wall Street Journal, citing S&P Dow Jones Indices.

The SPDR Dow Jones Industrial Average ETF (DIA) is trading just below its all-time high, but IYT and DIA do not need to move in lockstep to confirm the efficacy of the Dow Theory. “As the Dow Theory states, the indexes don’t have to make new highs at the same time, but the less time between the new highs, the more powerful the signal,” according to the Journal.

Up about 1.3% in the past month, IYT has taken off with some help from airline stocks. With no airline ETFs on the market, IYT’s 14.1% weight to the industry helps investors gain multiple airline exposure under the umbrella of one ETF. IYT is home to five airline stocks. [Planes and Trains Lead Transport ETFs]

Additionally, a strong earnings season has been supporting the transportation sector. Union Pacific (UNP) posted a 14% surge in quarterly profits and 7% rise in revenues, reports Michael Fowlkes for InvestorsObserver.

Additionally, Kansas City Southern (KSU) revealed a 10% rise in quarterly revenue. J.B. Hunt Transport Services (JBHT) showed a 9.3% increase in revenue year-over-year. [Shipping Data Boosts Transport ETFs]

IYT’s primary rival, the SPDR S&P Transportation ETF (XTN), is also flirting with all-time highs after soaring 2.7% in the past month. XTN allocates a combined 61.2% of its weight to the trucking and airline industries.

XTN uses an equal weight methodology, resulting in no stock accounting for more than 2.91% of the ETF’s weight. The fund is light on railroad names compared to IYT as that industry accounts for 12.9% of XTN’s roster.

SPDR S&P Transportation ETF


ETF Trends editorial team contributed to this post.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.