Warning signs?

The S&P 500 is very close to its August high:

 

Seems like a healthy market, right?  Well, not so fast.  Let's look at a couple of other things.

Remember, the S&P 500 is heavily weighted towards the Mag 7 megacap stocks.  To see just how heavily weighted, here's the equal-weighted version:

 

Very different story, isn't it?  This chart nearly got down to the 200-day moving average.  If it had crossed below it, that would have been a red flag, an indicator that bad things were on the way.  Luckily, it looks like it might have bottomed out for now, so maybe a correction will be averted.

One gauge of the health of the economy is the Dow Transportation Index.  It shows how well goods and people are moving from place to place.  When things stop moving as much, the economy is slowing down, even if the major stock indexes are continuing to rise.  Let's look at the transports:

 

Ouch.  Declining since July.  Also, we're getting close to a 50/200 crossover to the bearish side, a significant technical signal.

A big part of this decline is due to the price of oil products, of course.  Ships, planes, and trucks run on oil, which means transportation of goods runs on oil, which means the global economy runs on oil.

So what does all this mean?

Well, there's no guarantee of this or that happening, of course.  We won't know for sure until it happens.  But the divergence between the Mag 7 and the "tangible" economy is disconcerting.