Markets Finish a Down Week with Mixed Results on Friday $29 Billion Railroad Merger Monday - Chaikin Analytics

Markets Finish a Down Week with Mixed Results on Friday $29 Billion Railroad Merger Monday

Key Points

  • Major indexes finished mixed with the Dow down 0.71%, SP 500 down 0.06%, and Nasdaq and Russell 2000 up 0.76% and 0.88% respectively 
  • Canadian Pacific to buy Kansas City Southern in transaction worth ~$29 billion
  • Tech heavy QQQ Remains Overbought, $300 still key support level 
  • Commodities represented in the ETF PDBC were up close to 2% Friday 
  • Treasuries prices were off their lows, but remain in a downtrend, 10 year yield now at 1.75% 
  • S&P futures little changed after US equities finished mostly lower last week

Key Chart: SPDR S&P 500 Trust (SPY)

The SPDR S&P 500 ETF stayed in a Neutral Chaikin Power Gauge ETF Rating and remains in an uptrend since the March lows. The fund is in an overbought condition.  

Support is still in the $370 to $380 range and we continue to see upside to the $413 – $435 level.

Sector Highlight: Transportation

The Transportation Secretary, Pete Buttigieg, will testify on March 25th before the House Transportation and Infrastructure Committee on the current administration’s push to revamp infrastructure. Even though this theme has bipartisan support there remains a debate over the details. Ahead of this meeting, Canadian Pacific announced an offer to buy Kansas City Southern, KSU in a $29 billion stock and cash offer. One of the perceived value added benefits on this merger is to improve highway traffic, environmental sustainability and safety. With rail being four times more fuel efficient than trucking, the companies tout that once they merge they can help to shift trucks off the  already crowded highways. One factoid in the press release was that one train can keep more than 300 trucks off public roads! 

The Transportation Sector ETF IYT has been in a major uptrend for months with a predominantly Bullish ETF rating. Railroad stocks are heavy weights inside this ETF with an allocation of over 33%. KSU is bid-up over 16% pre-market, and it represents  roughly 10% of the transportation fund.  The ETF is overbought with weak money flow.

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