The market has had no problems this year, racing higher through the first two months of the year.
But more and more people are drawing attention to the structure of the rally.
This is from Dan Greenhaus at BTIG:
…the fact remains that there are some questionable developments unfolding. The Transports don’t look great, neither does the Russell 2000. The percentage of stocks trading above their 200 DMA is looking toppy while fund flows are starting to suggest retail investors are warming up to equities. So despite the S&P 500 trading up about 3-4% or so since we moved to a neutral position with a slight upward bias, we remain cautious for the immediate term outlook. Attention now shifts to Friday’s payroll number where a miss might bring about the decline we imply would be so welcome. More later this week.
In case you’re not familiar with it — and by this point you should be — this chart starting in 2011, shows the split between the Dow Jones Index and the Dow Transports, with the transports lagging in red.
Presumably a big aspect of that is oil.
Whatever the cause, fans of “Dow Theory” and just anyone who looks at transport stocks as key bellwethers for economic strength see this as cause for alarm.