An Important Market Laggard Breaks Out

It's hard to trust a new bull market...

The worry from the last bust tends to stick around. And it's hard to shake those feelings, even if prices reverse.

That has certainly been true this year. The COVID-19 crisis shocked the world, changed our daily lives more dramatically than anyone could have imagined, and pushed investors to extreme fear.

But now, stocks are back. The major indexes have been at new highs for months. And the economy is starting to show signs of recovery.

Still, if you're having a hard time trusting this new bull market, don't beat yourself up. It's normal. Scars from a market crash don't go away quickly... But you can't let them control you forever.

You need to start believing in this new bull market today. That's because just this month, an important market laggard broke out.

This underperformance was a warning sign hanging over the market since 2018. Today, it's gone. And that's one more reason you want to be along for this rally.

Let me explain...

Certain areas of the market are worth examining regularly.

These groups of companies can give crucial insights into the health of the market and economy. They can flash warning signs when times seem great, or "all clear" signs when times seem tough.

Those contrarian indicators are invaluable. And just this month, we got one.

The Dow Jones Transportation Average broke out to new all-time highs on October 7. That's the first new all-time high we've seen in the index since September 14, 2018. You can see it in the chart below...

It took more than two years, but transportation stocks have finally hit new highs. I hope you realize how important that is for this new bull market...

The transportation index includes shipping companies like FedEx (FDX) and United Parcel Service (UPS), railroads like Norfolk Southern (NSC) and Union Pacific (UNP), and airlines like United Airlines (UAL) and American Airlines (AAL).

Simply put, if goods and people are moving around the country, these companies thrive. And that's exactly what you'd expect to see when the economy is doing well and the future of the stock market is bright.

That's why, historically, the transportation index has been a good indicator of things to come in the market. If stocks seem dreary but transports are at new highs, it's a positive buy signal. And conversely, if stocks seem great but transportation stocks are lagging, it's a warning sign for the overall market.

That's the state we had been in for the last two years. Stocks were hitting new highs up until the COVID-19 crash began – but not transports. They were lagging, flashing a warning sign for stocks.

Now, the opposite is true.

That might seem hard to believe given what's happening today. Air travel is down dramatically. And plenty of folks are still working from home and going out a lot less.

Normal life is far from back. But transportation stocks have broken out to new highs. That tells me no matter how we might feel about it, this new bull market isn't one to fear... It's one to own.

Good investing,

Brett Eversole

P.S. My boss Steve Sjuggerud agrees that you need to own stocks right now. In fact, he's hosting an online event TOMORROW at 8 p.m. Eastern time to give a full update on the Melt Up... and the major change that has just transformed his thesis. Plus, he's even giving away a free recommendation to everyone that attends tomorrow night, to help you get ready for what's coming.

The event is free to join, but you'll need to register to save your spot... You can do that right here.

Further Reading

"This is a big change in sentiment," Steve writes. The stock market rally we've seen since the bottom in March has been lacking excitement from investment pros. But with that changing now, there are big implications ahead... Read more here: The Investment Pros Are Finally Getting Bullish.

"The stock recovery has gone global," Chris Igou says. Markets are making new highs around the world. And there's another major uptrend taking shape that will boost the Melt Up even higher... Get the full story here: A Major Opportunity in a Market You've Never Considered.

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Market Notes


Today's company is thriving as demand for "cloud" products increases...

Millions of people were forced to work from home when the pandemic struck. And now, even with restrictions beginning to lift across the U.S., many people still haven't returned to the office. That's a tailwind for today's company...

Paycom Software (PAYC) provides "human capital management" software to its business clients. Its tools help with talent acquisition, human resources, and payroll services. And its software is based in the cloud, so clients can access it from anywhere with an Internet connection. This has kept the company's sales growing as people work from home... In the most recent quarter, CEO Chad Richison said demand for Paycom's solutions "has never been greater."

As you can see in today's chart, Paycom shares have been soaring. The stock has risen more than 130% since bottoming on April 3, and it recently hit a fresh all-time high. As long as businesses need to keep running smoothly in a teleworking environment, this stock should continue higher...