The best performing segment of the Dow Jones Transportation Average over the last several years belongs to the rails. Companies like Union Pacific and CSX enjoyed healthy margins as U.S. railroad freight traffic boomed from coast to coast.

Driven by the bull market in commodities demand, including coal, the grains and liquefied natural gas, the rails made investors a bundle. Plus, soaring oil pricing compelled many companies to instead opt for rail services at the expense of trucking. The latter industry has almost collapsed since late 2007 as volumes have crashed, triggered by soaring oil prices until July 2008.

The party for the rails, however, is also over.

U.S. railroad traffic is now running about 20% lower compared to 12 months ago as dismal industrial output has resulted in sharply lower consumption. And the pace of decline has accelerated relative to the first quarter’s big 16% drop, according to Credit Suisse.

What’s happening in the rail industry is not unlike the bearish news affecting trucking, air cargo and dry bulk shipping. All modes of bulk cargo forwarding are now in a freefall since the fourth quarter of 2008 when global trade fell off a cliff. Higher oil prices in the midst of the harshest economic recession in 28 years, adds another blow to the prospect of short-term recovery.

Meanwhile, the trend of the Dow Jones Transportation Average is poor, despite yesterday’s big rally. The index recently broke below important support of 3,000 and is usually the first leading stock market barometer to break down ahead of economic stress. Constituents, which are highly economically sensitive, include the rails, airlines, truckers and other companies in the business of moving goods or passengers.

The fact this index is struggling again confirms my view that any “green shoots” the market is looking for is instead turning into “brown shoots.” The economy is not responding to stimulus as the Dow Transportation Index fails to stabilize.