The Dow Transports & Commodities

The positive correlation between the Dow Transports and the various other asset classes has been discussed previously on here. While there was a flurry of positive comments made recently when the Transports hit a new high, I remained dubious of the arguments presented. The historical precedence being quoted is very inaccurate. With commodities booming, imports booming and oil elevated, rails in particular have done exceedingly well this cycle. Given the Transport Index is comprised of only twenty components, how easy would it be for smart money to manipulate short term pricing to achieve the positive reaction we saw in the press? Or, for those who believe the transportation market provides excellent value to push prices higher?

Below is the Dow Transport ETF, IYT, along with buying pressure for the Dow Transports. While anything is surely possible in the future, it does appear as though professional interest is waining. This past move to new highs was the first time this cycle we had a major move (last summer lows to new highs) with minor buying pressure. With commodities and late stage industrials trying to launch a serious move higher, the Transports should eventually follow with similar enthusiasm. If not, one of the two markets is wrong. Let's watch and see.