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Random Thoughts: Are Transportation Stocks Forecasting a Decline?


Fundamentals and psychology square off into quarter-end.


Editor's Note: Todd posts his vibes in real time each day on our Buzz & Banter.

Norfolk Southern (NYSE:NSC) messed the bed Wednesday night, substantially cutting its third quarter forecast. This follows a similar slash by Federal Express (NYSE:FDX) as the slowdown in global growth manifests in the transportation stocks (FedEx has a 10% weighting in the transportation index, and Norfolk has 7%).

I read a research report yesterday where a brave bull opined "divergences no longer matter; all that matters is the open-ended QE-normous (my wording) and percolating performance anxiety into quarter and year-end. For fund managers playing ketchup, time is most definitely not on their side.

That might prove true-the structural and psychological metrics have trumped market fundamentals for a long time-but we would be wise to see both sides, even if the tape is in "bend, not break" mode and expiration looms large.

Check the chart below; history doesn't always repeat but it often rhymes.

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