July 11, 2019
It is a well-known fact that late in a business cycle, one may start to see important divergences between different sectors of the stock market. More specifically, it is not unusual to see the Transport sector start to underperform the broader market in anticipation of a slowing overall economy.
So it is that we must point out the recent breakdown of the IYT (iShares Transportation Index ETF) versus the broader SPY (SPDR S&P 500 ETF). The Ratio of IYT/ SPY chart shown below has arguably made a huge “Head & Shoulders” topping formation on a monthly basis going back to Q4 2014, and recently broke the neckline of that formation.