Has The Transports Signal Shifted?

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1.) GOLD – Gold continues to disappoint the bulls/gold bugs as it failed right at Trend ($4386). The signal – comprised of the rate of change of price, volume, and volatility – continues to signal new lows, now down at $4399. The signal (the squiggly thin blue line in the upper portion of the chart) is very dynamic and moves throughout the day, but the fact that it is signaling lower lows isn’t what bulls want to see. Right now, gold acts like it wants to test that $4100 area. Gold is slightly oversold here, but assets in a bearish (downward bias) trend have a propensity to crash in oversold conditions. Gold is now down over 22% from its January top. Gold doesn't excite me at this juncture.

2.) TRANSPORTS – Most people are thinking about rockets, space, and AI… not “transports” like trucks and railroads. That still makes sense… those are important themes that are helping drive one of the strongest areas of the market. But transports are still super important. They’re moving the materials to build those rockets, data centers, and robotics labs. Factories can produce products all day long. But if nobody is moving those products around the country, something isn’t working. Maybe demand is waning when we see the movement of products slow. Maybe it’s something else. Transport stocks don’t care what the story is. They care whether things are moving. The Dow Jones Transportation Average has rallied sharply off the April lows and has now worked its way back to the same area where sellers showed up earlier this year. I’ve pointed to the Dow Transports before, but the S&P Transportation Index may be even more interesting. Unlike the Dow Transports, this group already broke out to new highs in late May. Since then, prices have pulled back and are now retesting that former breakout level for the first time. Resistance turned into support… that’s what is supposed to happen in a healthy uptrend. Buyers who missed the initial breakout often get a second chance. Sellers who were leaning against resistance are forced to rethink their position. Now, we get to see whether demand shows up. If buyers defend these levels, the breakout remains intact and the trend continues. If they don’t, we’ll have new information to work with. Transportation companies still occupy a unique place in the economy. They connect manufacturers to customers, ports to warehouses, and products to consumers. Transportation stocks are sitting in a position where they’re likely to tell us something useful about the market’s underlying health.

3.) YIELD CURVE – I haven’t talked about the yield curve much lately, but it spoke fairly loudly yesterday after the Fed’s no action on rates and new guy Warsh had his press conference. It didn’t like what he was saying. The spread between 10- and 2-year Treasury yields narrowed sharply yesterday to its flattest since April '25. Is this a problem? No, not yet. But a narrowing curve isn’t what stock market bulls really want. This action is something to keep an eye on. Bond volatility is still pretty muted at 70 and trading below trend. So the bias for bond vol is still down. That’s good. But a yield curve that continues to narrow or worse, invert, wouldn't be very welcome.