A classic tell for the market — the Dow transportation average — is trading right above a key level

Commercial airliner taking off
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I've been taking notice of the Dow transports in recent sessions, as the index lagged the broader market on Friday but managed to hold just above key support. Here's why I'm watching the group, and particularly airline stocks.

The 200-day moving average has proved solid support for the Dow Jones transportation index this year, and the index was able to hold that level on Friday even as it fell a little over 1 percent. On Monday, it was up fractionally.

The index, which is often seen as a reliable gauge for broader market and economic health, did indeed dip slightly below that line for a New York minute in August, but it bounced back quickly.

Dow Jones transportation average with 200-day moving average

Inside the transports, I'll be watching the performance of the XAL airlines index. This group has had a rough run since mid-July, but it was able to bounce off its August lows 10 days ago. Heading into year-end, I'll be watching to see if it can continue with this bounce, and take out its early October highs, or if it rolls back over and takes out its double-bottom lows.

Whichever direction it breaks will be important for the group and the transports more broadly.

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