By Mike Paulenoff, www.MPTrader.com
The iShares DJ Transportation Index ETF (AMEX: 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 (oil down, Transports up). In any case, let's notice that the IYT is pushing up against its Oct-Mar 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.