Is This 100-year Old Indicator Suggesting Market Strength?

The Dow Jones Industrial Average (Dow) gained for the sixth consecutive day yesterday and closed at a new all-time high for the third straight day. The Dow Jones Transports (Transports), meanwhile, had another big day yesterday and has been one of the top performers since the election. The Dow and Transports will forever be linked, as they are the two components to Dow Theory. Charles Dow created the Dow Theory in the late 1800’s, and it revolves around needing confirmation from both industrial and transports before establishing market direction. Think about it—if both the industrial and transports are strong, this likely suggests an improving economy. The flip side is if both are going lower, the economy is weakening.

Another way to look at the relationship between the two indexes is to compare them on a relative strength chart. When the ratio of the Transportation Index to the Dow increases, this means that transports are outperforming. We have found that when this ratio on a weekly chart moves above its 40-week simple moving average for more than three weeks, stocks tend to move higher over the next year. This signal triggered recently; the last time it happened was in late 2012, right before a huge equity rally in 2013.

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Looking at historical data going back to 1979, this signal triggered 20 times. Take note, we removed the two largest recessions over the past 20 years, as we don’t see any signs of a coming recession. The S&P 500 gained more than 9% on average six months later and was higher 80% of the time. Going out a full year, the S&P 500 has been up more than 16% on average and higher all 20 times.

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Could this newfound strength from the transports be telling us the economy could be set for strong improvement as we head into 2017? It very well could be, and this could be another reason to expect the equity bull market could possibly continue as well.

IMPORTANT DISCLOSURES

Past performance is no guarantee of future results. All indexes are unmanaged and cannot be invested into directly. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.The economic forecasts set forth in the presentation may not develop as predicted. The opinions voiced in this material are for general information only and are not intended to provide or be construed as providing specific investment advice or recommendations for any individual security. Stock investing involves risk including loss of principal. Because of its narrow focus, specialty sector investing will be subject to greater volatility than investing more broadly across many sectors and companies. The S&P 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. The Dow Jones Industrial Average Index is comprised of U.S.-listed stocks of companies that produce other (non-transportation and nonutility) goods and services. The Dow Jones Industrial Averages are maintained by editors of The Wall Street Journal. While the stock selection process is somewhat subjective, a stock typically is added only if the company has an excellent reputation, demonstrates sustained growth, is of interest to a large number of investors, and accurately represents the market sectors covered by the average. The Dow Jones averages are unique in that they are price weighted; therefore, their component weightings are affected only by changes in the stocks’ prices. This research material has been prepared by LPL Financial LLC.

In Transport Wars, it’s Hyperloop vs Hyperloop

The Hyperloop is becoming a modern day gold rush, with 2 technology companies battling to capitalize on the transportation mode’s promise of interstate travel at breakneck speed.

The innovation, with its science fiction-like description, is the brainchild of entrepreneur and Tesla Motors (TSLA)founder Elon Musk. The technology looks to challenge existing transportation methods by offering cheaper, faster and safer travel through a low-pressure system that move pods just under sonic levels, at about 760 mph. As the the idea gradually moves from concept to reality, a number of startups aim to plant their flags in the emerging sector.

“We are the first ones that took the Elon Musk project in 2013 and transformed it into something real,” Bibop Gresta, Hyperloop Transportation Technologies (HTT) COO told CNBC in a recent interview. “We are the only company who are actually building a real full-scale Hyperloop.”

Yet a company with a similar name, Hyperloop technologies, is also jumping into the fray. The company has raised $100 million in funding to track test Hyperloop technology in Nevada, and is also trying to stake a claim on the emerging technology.

Recently, Gresta’s company announced the construction of a Hyperloop prototype in Quay Valley, California, which is halfway between L.A. and San Francisco. The company also signed a deal with Slovakia, a hub for technology development in Europe, which HTT expects will be a beneficial catalyst for Hyperloop’s expansion quest.

Gresta told CNBC that the difference between Hyperloop Technologies and HTT is that his company researched its scheme aside 520 scientist from 42 countries before building a “full-scale” Hyperloop. He contends that Hyperloop Technologies has taken a different approach, and that employees of Space X and NASA are working actively with HTT.

“There’s an old model where you raise a bunch of money and then you have to spend it as fast as you can to demonstrate to your investor that you’re doing something,” he told CNBC, before adding that the corporation is “very happy to create an industry together because it means that the concept is valid.”

Separately, Rob Lloyd, CEO of Hyperloop Technologies told CNBC that his company is “clearly leading” the development of the Hyperloop concept, as itsboard members have been leaders in major companies before the startup. Hyperloop Technologies is looking to reap nearly $10 million in various incentives from the state of Nevada for its rail, which will carry passengers at 600 miles per hour.

“Our company is leading; we are not the only company, I don’t expect us to be the only company, but we are the company that’s leading.” Lloyd said in a recent interview. He added that positions in Hyperloop Technology are in high demand, with 130 full-time employees and hundreds of applicants per open positions.

Lloyd is a tech veteran, having worked for Cisco Systems (CSCO) for more than 20 years before joining Hyperloop Tech. Co-founder Shervin Pishevar, who is also managing director of Sherpa Ventures, a venture capital firm that’s invested in startups such as AirBnB, Uber and Munchery, co-leads the tech start-up.

Regardless, the idea of rapid transportation is gathering momentum, and may get a boost from the federal government. Transportation Secretary Anthony Foxx said recently that Hyperloop tech could be eligible for funding via the University Transportation Centers program, which doles out more than $70 million per year.

Lloyd said that the difference between his company and others is that Hyperloop Tech focuses on both freight and people. Gresta also mentioned the idea of transported goods in a recent interview.

“The movement of freight is something that has tremendous impact on reducing traffic, moving to a more sustainable electric only and even shipping containers,” Lloyd said. “Our company believes this will be truly transformational.”

Written by Denise Garcia of CNBC

(Source: MSN)

The Hyperloop is About to Be Built — But Not in California

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Hyperloop Transportation Technologies

The Hyperloop could easily become the next big thing after bullet trains. It’s a tube-based transportation system, in which pressurized passenger pods are accelerated through reduced-pressure tubes, which enables them to develop speeds as high as 760 miles per hour.

One of the Hyperloop design’s advantages is that the system is self-sufficient because of solar panels placed along the track that produce enough energy to run it. It is also earthquake-resistant, thanks to the use of pylons that carry the weight of the construction and provide the stability.

The project was first proposed by Elon Musk, the entrepreneur and co-founder of Tesla Motors Inc. . The system was touted to be a lower-cost alternative to a high-speed-train service between San Francisco and Los Angeles.

If you follow my column, you have probably noticed that I’ve closely followed the Hyperloop development since June 2015. At that time there were many unknown factors about the project, both bureaucratic and technical, that needed to be taken into account. While resolving technical issues was just a matter of time, crossing the red-tape sea in the U.S. forced one of the companies competing to make the Hyperloop a reality — Hyperloop Transportation Technologies, or HTT — to consider building their futuristic transportation pod in Slovakia, at the center of Europe.

Just a few weeks ago, HTT CEO Dirk Ahlborn announced that his company has reached an agreement with the Slovakian government. Their plan is to establish the Hyperloop transportation route from Vienna to Bratislava, Slovakia, and from Bratislava to Budapest, Hungary.

It normally takes about eight hours to travel from Košice, Slovakia, to Vienna to Budapest. But it’s only 43 minutes with the Hyperloop.

“Slovakia is a technological leader in the automotive, material science and energy industries, many of the areas that are integral to the Hyperloop system,” Ahlborn said in a press release. “With our project in Quay Valley, this agreement with Slovakia, and future developments with other regions of the world, HTT truly has become a global movement.”

The company’s suggestion has been met with enthusiasm from Slovak Republic officials:

“Hyperloop in Europe would cut distances substantially and network cities in unprecedented ways. A transportation system of this kind would redefine the concept of commuting and boost cross-border cooperation in Europe,” said Vazil Hudak, Slovakia’s economic minister, said in a statement. “The expansion of Hyperloop will lead to an increased demand for the creation of new innovation hubs, in Slovakia and all over Europe.”

However, before we can look forward to backpacking across Central Europe and getting back home by dinner, significant financial hurdles need to be overcome, more specifically the cost, which is somewhere between $200 million and $300 million. If everything goes according to plan, the project should be finished by 2020, Wired reports.

In an interview with Vice, HTT Chief Operating Officer Bibop G. Gresta said the initial feasibility study showed that the Hyperloop pod could transport up to 10 million people a year. The biggest challenges, he said, are politics and regulation.

Do you think the Hyperloop will be embraced as a new modern transportation system? If not, why not? Please let me know in the comment section below.

Written by Jurica Dujmovic of MarketWatch

(Source: MarketWatch)