IYT Remains Uninspiring

iShares Dow Jones U.S. Transportation Index (IYT - commentary - Trade Now) is still weak, even after the Buffett buyout of Burlington Northern (BNI - commentary - Trade Now) last week.

In terms of long-term momentum, IYT is in the middle of the pack of funds we track, surrounded by iShares S&P Global Energy (IXC - commentary - Trade Now), PowerShares Dynamic Leisure & Entertainment (PEJ - commentary - Trade Now) and iShares Russell 2000 Index (IWM - commentary - Trade Now), an index I've also highlighted due to its weak technical picture.

IYT's short-term momentum picture is worse: It ranks much lower and actually has similar momentum to ProShares Short S&P 500 (SH - commentary - Trade Now), iShares Thailand (THD - commentary - Trade Now) and iShares Dow Jones U.S. Finance (IYF - commentary - Trade Now).

While IYT's short-term momentum can improve quickly (and last week's rally did help it climb in relative momentum to other funds), the long-term momentum is unlikely to see a major improvement until it can crack a new high, which would be around $73 per share, a 6% increase from Friday's close.

When and if it does hit a new high, however, the Dow Jones Industrial index is also likely to be at a new high -- it's 0.7% away from breaking its 52-week high as of Friday's close -- and new highs for both indexes would be bullish from the standpoint of the Dow Theory.

The Dow has been one of the strongest indexes and I hold Diamonds (DIA - commentary - Trade Now) in my ETF Action portfolio. Stick with DIA, or the PowerShares QQQ (QQQQ - commentary - Trade Now) for now if you're looking to be long a major index.

At the time of publication, Dion was long DIA and QQQQ.

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At the time of publication, Dion was long DIA and QQQQ.

Don Dion is president and founder of Dion Money Management, a fee-based investment advisory firm to affluent individuals, families and nonprofit organizations, where he is responsible for setting investment policy, creating custom portfolios and overseeing the performance of client accounts. Founded in 1996 and based in Williamstown, Mass., Dion Money Management manages assets for clients in 49 states and 11 countries. Dion is a licensed attorney in Massachusetts and Maine and has more than 25 years' experience working in the financial markets, having founded and run two publicly traded companies before establishing Dion Money Management.

Dion also is publisher of the Fidelity Independent Adviser family of newsletters, which provides to a broad range of investors his commentary on the financial markets, with a specific emphasis on mutual funds and exchange-traded funds. With more than 100,000 subscribers in the U.S. and 29 other countries, Fidelity Independent Adviser publishes six monthly newsletters and three weekly newsletters. Its flagship publication, Fidelity Independent Adviser, has been published monthly for 11 years and reaches 40,000 subscribers.