The iShares DJ Transportation Index ETF (IYT) continues to act as though oil prices are considerably lower than $101/bbl and that the U.S. economy is hitting on more cylinders than currently perceived. Let's note with interest that crude oil prices ended their prior correction ($86) during the third week of January, which also coincided with the corrective low in the IYT at 71.62, and since then oil prices have climbed to a $111.80 high, while the IYT has continued to climb as well. However, during the past week or so, oil prices have declined by 10% while the IYT has climbed about the same percentage, which may just mean that a more "intuitive" inverse relationship may be emerging. In any case, let's notice that the IYT is pushing up against its October-March resistance line, now at 88.00, which if hurdled and sustained should trigger upside follow-through to 90, and then 93 thereafter. Why? Like I mentioned at the outset, the IYT appears to be anticipating considerably better conditions for the transportation stocks in days and weeks ahead. Only a plunge beneath 84 will wreck the developing bullish pattern.



Mike Paulenoff is a 26-year veteran of the financial markets and author of MPTrader.com, a real-time diary of his technical chart analysis and trading alerts on all major markets. For more of Mike Paulenoff, sign up for a free 15-Day trial to his MPTrader Diary by clicking here.