A Surprising Sector That's Dominating the Market

Airline stocks are dominating the market.

Over the past six months, the Dow Jones US Airlines Index has trounced almost every single sector out there. As a group, the airlines are up more than 55%, compared to an 8% gain in the S&P 500.

That’s some impressive performance…

“The US airline industry is entering its fifth consecutive year of forecasted profitability, the second longest post-deregulation stretch on record,” comment JP Morgan analysts. “Truthfully, we’re running low on ideas as to what could derail current prosperity in the near term, save for exogenous, black swan events.”

Hmm…

Statements like this get me thinking that maybe it’s time to start looking for cracks in the airlines’ armor. Is everyone too bullish on these stocks right now?

Dow Jones US Airlines Index vs. S&P 500

Now, I wouldn’t go out and short any of these airline stocks. That’s crazy. You fight the trend and you’re going to get burned. In fact, it’s no secret that I’ve been bullish on the airlines since last year when they started breaking out. But even with horrible weather grounding countless flights this winter, the news has remained decidedly bullish on these stocks.

Are these the hallmarks of bullish sentiment hitting an extreme? It’s possible…

After a huge year in 2013, volatility might return to the airlines. That’s something worth watching in the days and weeks ahead…

Regards,

Greg Guenthner
for The Daily Reckoning

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