Trucking Looks Set for Potential Turnaround
As I sit here in the beautiful Smoky Mountains, I note that, in my absence, the S&P 500 has again, in August, held and rallied from key support at 2822, following last Friday’s tweet sell-off. Despite this gut-check roller coaster ride, the technical backdrop remains unchanged, with the index likely to remain in a broad trading range well into September, and possibly into early October. The proprietary weekly indicators I track point to a few more choppy weeks, which should set the stage for a strong Q4-year-end rebound. I see upside resistance around 2940-2945, near the August trading range upper end and coinciding with the 50-day moving average and prior highs.
Though it’s easy to become mesmerized or even paralyzed watching the market’s volatility, I encourage investors to screen ideas from the bottom up. Often there are less obvious clues developing at the stock level that are masked by the market’s movement.
For example, the trucking group is showing surprising signs of recovery despite the gloomy macro-economic headlines. As the most cyclical group within the transports, any improvement that appears is one I view as Mr. Market telling us to pay attention. The stocks below illustrate a potential bearish to bullish profile transition.
Old Dominion Freight Line (ODFL) has remained the group’s standout leader throughout 2018-19, even challenging its ‘18 highs this summer. The recent pullback shows evidence of rallying from support near 156, which conveniently coincides with its 50-dma and Q1-Q2 highs. I expect ODFL breaks out to new highs in Q4.
Despite small-cap indices weakness, Marten Transport (MRTN) has traded in relatively narrow base through most of 2019. MRTN is basing above its 200-dma while a move above first resistance at 20.75 followed by 21.64 would signal an important positive trend change. Key downside support is near 18.
Lastly, but most importantly, JB Hunt (JBHT) has rallied from important support levels following last Friday’s broad market sell-off. JBHT then moved above resistance at its prior high of 107 on Thursday.
By definition, a new uptrend is in the early stages, with JBHT establishing higher lows and higher highs through the summer, just as the recession chorus grows. Even if you aren’t comfortable buying such a cyclical group given the macro concerns, truckers in general, and JBHT specifically, should be on your watch list as a barometer of the economic backdrop.
Noteworthy
Short-term oversold bounces are attempting to develop within downtrends for cyclicals, such as financials, industrials, materials and energy, while consumer staples and utilities are again showing early signs of peaking within their Q4 2018-current trading ranges.
Technology’s uptrend is still intact while the consumer discretionary sector is reaccelerating within a long-term uptrend.
