Transports ETF Has Momentum

The iShares Dow Jones U.S. Transportation Fund(IYT Quote), which tracks the Dow Jones Transportation Index, received some bad news this week when the International Air Transport Association (IATA) announced it expects airlines to lose $9 billion this year.

One of the anticipated drags on the industry is higher oil prices, which have climbed to more than $70 per barrel, up from the $50s in early May. From May 8 through May 13, IYT lost 10.5%. The decline was led by Overseas Shipholding(OSG Quote) (5.06% of assets), which lost more than 16%. FedEx(FDX Quote) (8.98 %) and Union Pacific(UNP Quote) (8.37%) were two other laggards over the period.

After the decline, IYT traded sideways until the end of May, when it began to rally. Leading the way were Con-way(CNW Quote) (6.33%) and J.B. Hunt(JBHT Quote) (5.64%), which rallied stronger than the rest of the top holdings.

Between May 13 and June 5, IYT gained 12.2%; Conway advanced roughly 30% and J.B. Hunt added 25%. Railroads Union Pacific, Burlington Northern(BNI Quote) (11.91 %) and Norfolk Southern(NSC Quote) (6.26%) were the next three best performers, with highly correlated returns that left them up between 16.1 and 17.1 %. Delivery firms FedEx and UPS were among the underperformers, the former up 8.1 % and the latter down 1.7%.

Recent strength is showing up as improved momentum, and IYT's short-term momentum crossed into positive territory during the past week. While not a sign of great strength by itself -- ETFs with similar short-term momentum include PowerShares Building & Construction(PKB Quote), WisdomTree International Healthcare (DBR Quote) and iShares Dow Jones U.S. Technology(IYW Quote) -- IYT is also showing improved long-term momentum.