Are The Semis And Transports Leading The Market To New Highs?

For generations of market watchers, the Dow Jones Transportation Index (IYT) was considered the ultimate leading indicator for the broader market. The idea being that if goods were moving, the economy was humming.

For today's digital economy, the "leading" torch has been handed to the Semis group, which we labeled "the Transports of the 21st century" years ago.

The logic is the same: semiconductors are the essential inputs that power modern economic activity, from smartphones to data centers to automobiles.

When both of these bellwether indices are breaking out to new all-time highs simultaneously, as they are right now, it's a signal worth paying attention to.

What makes the current setup particularly compelling is that the S&P 500 (SPY) has not yet confirmed the move, still sitting roughly 2.5% below its own all-time high.

Historically, when leading indicators like the Transports and Semis are making new highs while the broader market lags, it has been viewed as a sign that the index is being pulled higher, not pushed.

The charts for Transports and Semis above show clean breakouts, with the 50-day moving average trending solidly higher beneath price.  That is the kind of technical foundation that tends to give bulls confidence.

If the S&P 500 closes the gap as well and confirms with its own breakout, the weight of the evidence will be difficult to argue with.