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TheStreet Open House

On the Lookout for a Dow Theory Sell Signal

Stocks in this article: UPSFDXCHRWCSXJBHT

The year-to-date closing lows for 2012 were set on June 4 at 12,101.46 for the Dow industrials and 4847.73 for the Dow transports. Closes below both of these levels would confirm a Dow Theory sell signal.

A year ago, the market was facing issues similar to the ones it confronts today. The U.S. had lost its triple-A rating, European debt concerns dominated headlines and there was discussion about the failure of QE2. Today, the European debt crisis is still front and center, and Wall Street is abuzz with predictions the Federal Reserve will offer QE3.

If we get a Dow Theory sell signal, the downside risk appears to be similar to 2011. The Dow transports fell nearly 30% from their all-time high on July 7 to a low of 3,950.66 on Oct. 4, 2011. The Dow industrials fell 19% from its May 2 high to a low of 10,404.49 on Oct. 4, 2011.

Before the market opened Tuesday, United Parcel Service (UPS) reported weaker-than-expected earnings and revenue. The package shipper also lowered its full-year outlook, and its shares fell 3.61% on the day, closing below their 200-day simple moving average at $75.19.

Following are updated profiles for the transportation stocks I analyzed in June 2011.

CH Robinson Worldwide (CHRW) is not in today's table because the stock was subsequently downgraded to hold from buy at www.ValuEngine.com. In addition I show no Value Levels.

CSX (CSX) has a negative daily chart pattern with a monthly value level at $21.42, a semiannual pivot at $22.60 and quarterly risky level at $27.63.

FedEx (FDX) has a negative daily chart pattern with a semiannual value level at $82.97, a weekly pivot at $89.92 and monthly risky level at $96.09.

JB Hunt Transport (JBHT) has a negative daily chart pattern with semiannual value level at $49.82 and weekly risky level at $57.10.

Kansas City Southern (KSU) has a neutral daily chart pattern with an annual value level at $61.62, a weekly pivot at $70.78 and monthly risky level at $76.40.

Norfolk Southern (NSC) has a neutral daily chart pattern with a semiannual value level at $68.50, and a weekly risky level at $74.31.

United Parcel Service has a negative daily chart pattern with a semiannual value level at $70.89 and a weekly risky level at $80.52.

At the time of publication, Suttmeier had no positions in stocks mentioned.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

Richard Suttmeier has an engineering degree from Georgia Tech and a master of science from Brooklyn Poly. He began his career in the financial services industry in 1972 trading Treasury securities in the primary dealer community. In 1981 he formed the government bond department at LF Rothschild and helped establish that firm as a primary dealer in 1986. Richard began writing market research in 1984 and held positions as market strategist at firms such as Smith Barney, William R Hough, Joseph Stevens, and Rightside Advisors. He joined www.ValuEngine.com in 2008, producing newsletters covering the U.S. Capital Markets and a universe of more than 7,000 stocks. Richard employs a "buy and trade" investment strategy. You can reach Richard at RSuttmeier@Gmail.com.
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