This column was originally published on RealMoney on Jan. 23 at 12:47 p.m. EST. It's being republished as a bonus for TheStreet.com readers. For more information about subscribing to RealMoney, please click here.

If you pay attention to the correlation of different markets, you know that the Dow Jones Transportation Average has been underperforming the Dow Jones Industrial Average for some time. As I've said before, I am not a Dow Theorist, but I do pay attention to intermarket reactions. They can be an early signal of possible weakness or strength.

Last week, the transports came back to life, breaking above the 50-day moving average on heavy volume. One of the driving forces behind the move was the strength in railroads. This may be another sign that some underlying strength still remains in the market.

Rail stocks corrected significantly from April to September and have since regained most of their losses. They've been showing strong relative price strength. In addition, many of the large rail companies have seen their earnings and guidance through 2008 continue to increase.

The general market is again showing signs of internal weakness, and some of the leadership stocks are starting to roll over. If this is the beginning of a correction, it will be interesting to see how some of these transportation companies hold up.

Let's take a look at the charts.

Dow Jones Transportation Average



The action in the transports over the past several months has been very erratic. Last week, the index broke above the 50-day moving average. The price has made a quick "V" move up to the November high. Hopefully, this isn't another double-top formation like it had last May and June. If the transports are going to continue their rise, price will need to hold above the 4700 level. If it breaks that, then we've probably seen a false move and a setup for another downside correction.


Burlington Northern



Last week, Burlington Northern ( BNI) broke above the three-month downtrend and the 50-day moving average. A pullback to the $76 area would be healthy to set up another move higher. If that level doesn't hold and the stock breaks below $74, it would signal that a larger correction is in the works.


Norfolk Southern



Norfolk Southern ( NSC) also made a strong turnaround, breaking above resistance last week. The stock will need to hold the $50 level to confirm the recent strength. If there is renewed weakness and the stock breaks below $48, we will probably see a test of the August and September lows.


Union Pacific



Over the past several months, Union Pacific ( UNP) has built a better base than Burlington Northern or Norfolk Southern. It also has had better institutional support, as price has held above the 200-day moving average since October. The breakout will need to find support around $92. If we see a drop below $89, we could quickly see a retracement to the September lows.

I'm always trying to keep you aware of emerging groups in the market. If these stocks hold their breakout levels and move higher, it would be a good sign for the economy. However, be careful, because other areas of the market are showing signs of topping out, and a full-fledged correction could take these stocks with them.

At time of publication, Manning had no positions in any of the stocks mentioned, although holdings can change at any time.

Mark Manning, AAMS, is an Accredited Asset Management Specialist and Registered Investment Advisor with Butler, Wick & Co., where he specializes in wealth management. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Manning appreciates your feedback; click here to send him an email.

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