Futures are inching higher this morning with the Dow Industrials looking to build off of a stronger end to last week. Dow Futures are up 0.25% as of this writing after adding 0.04% on Friday. S&P 500 futures are also higher, while the Nasdaq futures are off slightly this morning. The 10yr US Treasury yield is ticking higher in the futures session as well but remains under 4.3% while WTI Crude holds in above $80.
It’s a light economic and earnings calendar today. Dallas Fed. Manufacturing activity is released this morning, and we will look to see if the very near-term turn in cyclical stocks will be supported by the new data. AI hype or no, a healthy bull market should benefit a broader cross section of stocks than what we’ve seen in 2024. The XLK and XLC have done most of the heavy lifting for the Index this year. Bull markets are also defined by optimism, which is hard to see in cyclical sectors. With the performance spread between Growth and Value now extremely wide over multiple timeframes, we should see some bottom-fishing in cycles if the bull is to continue in earnest.
Eco Data Releases | Monday June 24th, 2024
| Date Time | Event | Survey | Actual | Prior | Revised | |
| 06/24/2024 09:00 | Bloomberg June United States Economic Survey | |||||
| 06/24/2024 10:30 | Dallas Fed Manf. Activity | Jun | -15 | — | -19 | — |
S&P 500 Constituent Earnings Announcements by GICS Sector | Monday June 24th, 2024
No S&P 500 Constituents Report Today
What’s the Situation with Transportation?
A hallmark of past market expansions has been strong price action from transportation stocks. Charles Dow, the founding editor of the Wall Street Journal, Creator of the Dow Jones equity indices had an eponymous theory for identifying the primary trend in equities. The Dow Theory used the Dow Jones Industrial Average and the Dow Jones Transportation Average as proxy trends for the US economy. Both needed to make new highs or new lows to confirm the current trend in force. These groups of stocks didn’t necessarily need to lead the market, but in absolute terms the stocks comprising them should be getting bid up on improving prospects. Why Industrials and Transports? The idea was these two groups of stocks represented the inventory cycle as well as the demand cycle. If transports co.’s weren’t showing strong results, then there was likely a problem with aggregate consumer demand, if industrials weren’t showing strong results, there was likely a problem with production capacity, raw materials inputs or labor. When both of these indices are making new highs, the investor community is signaling optimism about the prospects of these businesses and the table is set for expansion.
A look at the Down Indices today shows the reason for concern in the current bull market with the Dow Transportation Index in particular not close to making a new high. This is of course a venerable indicator of economic expansion and contraction, developed over 100 years ago, so there is some chance that the modalities of our economy have changed, but what is obvious is the pronounced weakness in the companies that move our goods around the country and the world. This is not typical bull market activity and needs to be monitored.
- Dow Jones Industrial Average (200-day m.a. | Relative to S&P 500)
- Dow Theory requires the indices to “confirm the primary trend” by generating a new “intermediate-term high”. The parameters are vague leaving Dow Theorists some wiggle room, but the current Industrials chart is made a higher high in May and would need to hit above 40077 to confirm the uptrend again. HOWEVER, with the Transports so weak, the Industrials would trigger a Dow Theory SELL signal with a move below 37716 as the Transports have recently made an intermediate-term low. Such is the precarious position of the equity market by this gage.
- Dow Jones Transportation Average (200-day m.a. | Relative to S&P 500)
- Dow Theory requires the indices to “confirm the primary trend” by generating a new “intermediate-term high”. The parameters are vague leaving Dow Theorists some wiggle room and some opportunity for controversy, but I am using the Feb. 2024 high at 16275 as my “buy signal” level for the Transports
Sources: Bloomberg
