Transportation ETF... And Other Investments That Have Benefited From Lower Oil

Financials dominated the spotlight in the 9/16/08 volatile session. In fact, the CBOE Volatility Index (VIX) has closed 2 consecutive days above the ultra-panicky level of 30.

Might that imply that there's more upside from a bear-weary market to come? A pre-election mini rally of sorts? (Note: The VIX has yet to falter at identifying low-risk buying opportunities in the current stock market bear.)

Yet quietly, the iShares Dow Jones Transportation Average Fund (IYT) has seemingly defied everything about a troubled economy. In March, I explained that IYT was one of the funds that MUST perform for 2008 to demonstrate hopes for economic recovery.

Unfortunately, sky high oil brought the market to its knees early in the summertime. And the credit crisis finished off the summer's second half... leaving investors stranded in the bear's woods.

Nevertheless, IYT has managed to remain potent in '08. It is up roughly 12%, confounding gurus and Dow Theorists alike. Moreover, it is well above its short-term (50-day) and long-term (200-day) trendline.

Nevertheless, transports are not alone in capitalizing on lower energy prices. It's possible that the precipitous drop in oil explains the relative outperformance for Consumer Discretionary (XLY) and SPDR Retail (XRT) in recent months.

Retail (XRT) is above its 200-day moving average (i.e., a technical uptrend), while Consumer Discretionary (XLY) is currently testing the resistance of the long-term trend. And while the overall market has recently fallen below the July lows here in September, XLY and XRT have appreciated 10% and 20% respectively since July.

Of course, few people really expect energy prices to stay down in the oil drum for years. The only way that'll happen is through continued dollar strengthening and a government that makes a very quick commitment to natural gas.

As for the dollar strengthening, some say it is the more recent strength of the dollar that caused oil's slide. Others say it's the economic slowdown worldwide.

Either way, PowerShares US Dollar Bullish (UUP) has performed exceptionally well since oil topped out near $150 per barrel. Using United State Oil (USO), here's how both have fared since 7/3/08:

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