Transportation stocks have entered a death cross, which means the Dow Jones Transport Average (Dow Jones Global Indexes: .DJT) 50-day moving average has dipped below the 200-day moving average. That indicates an even greater lag in the 20-constituent index (DJ-20) with the broader market: The sector is down over 4 percent in just the last month while the S&P 500 (INDEX: .SPX) is hitting new highs.
Yet while some traders may see a death cross as a warning sign to sell stocks, one market player doesn't fear the dreaded formation.
"The death cross is in progress right now," said Todd Gordon, founder of TradingAnalysis.com, this week on CNBC's Fast Money, adding that it previously happened last year and led to a significant downtrend.
"The question right now is, will this continue," he asked.
The DJ-20 has fallen since crude oil has rallied, which has sent airline stocks tumbling. Crude (NYSE: WTI) has risen significantly since January lows, hovering near the $50 mark since mid-May.
In fact, airlines comprise a significant chunk of transports—six of them are airlines, including Alaska Air Group (NYSE: ALK), American Airlines Group (NASDAQ: AAL), Southwest Airlines (NYSE: LUV) and United Continental Holdings, which owns United Airlines (NYSE: UAL). As a result, the index has suffered—but Gordon doesn't expect that to last for much longer.
This does not mean a "sell signal" for investors, Gordon said. Rather, he sees the crude rally as an indication of a broader recovery, but oil may not have much further to run. Analysts expect oil to hold near its current range this year, with few expecting prices to break $55. That may help contain selling on airline stocks in the medium-term.
"Because crude oil is coming back, that's the reason, I believe, stocks have stabilized," Gordon said. The prospect of higher fuel costs "is hurting the airlines, which I believe is really hurting those transports."
Gordon cited the NYSE ARCA Airlines Index (NYSE Arca: .XAL), in decline,which he called "virtually indistinguishable," from the Dow Jones Transport Average, a correlation of about 93 percent.
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