by Michael Tarsala, CMT
The number of packages shipped help give us insight into the economy’s strength.
From that perspective, second-quarter earnings from UPS present new worries about the global economy, and particularly what’s happening in China.
Export volume at UPS rose 0.8% over the same quarter last year. The company saw a double-digit decline in exports from Asia to the U.S. and Europe.
In its report, UPS noted:
- Increasing uncertainty in the U.S.
- Continuing weakness in Asia
- Lower projections in Europe due to economic concerns and the ongoing debt crisis
All of those concerns together led the company to lower its 2012 net income guidance. Management now sees lower-than-expected growth in the second half.
Going back to Dow Theory, you want to see both industrial stocks and transports (like UPS) moving together to confirm a trend – either to the upside or the downside.
Source: Stockcharts.com
The red-and-black line on the chart is the Dow Transportation Index. It posted a double-top earlier this month, failing to move past the June highs.
That same double-top has now occurred for the Dow Jones Industrials.
Both have failed uptrends, and both the industrials and the transportation index are now falling.
