A Highly Favored Group of Ours Faces Near-Term Resistance
We’ve been very bullish on Airlines dating back to the genesis of this site in May of last year.
Our original and ongoing thesis on the group can be seen by clicking right here.
As of right now, the group, via the DJ Airlines and S&P Airlines Indexes, faces a decent amount of falling resistance.
As such, we wouldn’t be surprised to see some near-term selling/pressure.
That said, as the ratio chart of the S&P Airlines Index vs. SPX shows on the far right, the group is still down ~75% on a relative basis vs. the broader market since the early 2000s.
The former point about near-term resistance is the “trees” and the latter point about the group still being down 75% on a relative basis is the “forest”.
In other words, we believe airlines are apt to out-perform the broader market by a wide margin over the coming five-ten years driven by commodity cost visibility, industry consolidation, a rising USD and steadily improving global economies.
Never hurts taking profits in the near-term though given the group is up 38% over the past six months vs. a ~8% increase in the SPX over the same period.