Wednesday, July 29, 2015

UPS fires warning shot.....ANOTHER PESKY FACT!

UPS fires warning shot across the bow of the stock market and the Fed

Selloff in UPS stock and the Dow transports is a warning of a similar correction for Dow industrials.

United Parcel Service Inc. has fired warning shots across the bow of the Federal Reserve and the stock market, by saying on Tuesday that U.S. economic growth appears to be slowing.

The package-delivery giant's cautious outlook runs counter to what Fed Chairwoman Janet Yellen said earlier this month. It also suggests investors should take the relative weakness in UPS stock, as well as the Dow Jones Transportation Average, more seriously, as a warning that a much bigger selloff may be on the horizon for the broader market.

UPS is the biggest member of the Dow transports, measured by total sales and market valuation, so investors, and even the Fed, should be 
paying close attention.

According to the Dow Theory of market analysis, which has remained relevant among market watchers for over a century, members of the Dow transports are believed to have their finger on the pulse of the economy. That's because they act as the link between those who make the goods—members of the Dow Jones Industrial Average—and those who consume them.

So when the Dow transports and UPS stock underperform the broader market, it could portend weakness in the broader market.

"If the Dow transports and Dow industrials diverge—for example, if the industrial average keeps climbing while the transports decline—watch out."

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