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.

By Mike Paulenoff

Mike Paulenoff is author of the MPTrader.com (www.mptrader.com) , a real-time diary of Mike Paulenoff's trading ideas and technical chart analysis of Exchange Traded Funds (ETFs) that track equity indices, metals, energy commodities, currencies, Treasuries, and other markets. It is for traders with a 3-30 day time horizon, who use the service for guidance on both specific trades as well as general market direction

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