Blood on the Tracks: Transportation Average in Correction

It's been a rough month for transportation stocks and Monday's tumble sent the Dow Jones Transportation Average back into correction territory, a condition unnoticed by financial pundits who are supposed to be on top of such events.

Maybe it's because the transports - and the rest of the stock universe - has had a happy 2019 thus far, but the previous high referenced by the ^DJT dates back to September 14.

The S&P and NASDAQ set new all-time highs earlier this month, but the Industrials, like the Trannys, harken back to 2018. October 3 to be precise.

While the other indices took sizable hits on Monday, they are each down around five to six percent, but the transports have been taking it on the chin of late, their pronounced decline due, no doubt, to ongoing trade tensions with China. Since trade and transportation are so heavily intertwined, it doesn't take a mastermind to figure why the transports have been treated so harshly.

With the trade scenario likely to continue devolving, expect no relief in the transport sector. The next key points for the average is around 9900 (the October lows) and 8637 (late December). Should the transports continue their descent from here, expect the other indices to follow suit, which means the peals of panic will be loud and sustained.

This entire exercise in trade trolling will eventually work itself out and the Chinese are likely to end up on the losing side. As President Trump never fails to highlight, they've been winning for decades, and it's time to turn the tables, at least a little bit. It's not like the Chinese empire will return to the 18th century, though, because they've got trade tentacles everywhere. The US is seeking better terms, and they're almost certain to get them because China will be pragmatic. They will not risk losing power control over trade with just one country, even though that country is their biggest customer.

China will politely bow, the president will rightly claim a victory, stocks will be lower, but they will spring back, like they always do. President Trump's trade policies are disruptive, but, they will benefit US business interests in the long term. They're nothing to be panicked about and certainly aren't going to threaten the US economy in any grand fashion.

In the meantime, however, the transports and industrials are probably going to take a significant hit. Figure another 15-20% on the trannys and 10-15% downside for the indys.

Dow Jones Industrial Average: 25,324.99, -617.38 (-2.38%)
NASDAQ: 7,647.02, -269.92 (-3.41%)
S&P 500: 2,811.87, -69.53 (-2.41%)
NYSE Composite: 12,526.71, -261.43 -2.04%
Dow Jones Transportation Average: 10,305.85, -296.34 (-2.80%)