According to the chart, stocks related to the economy are underperforming, especially this leading stock.
Machinery stocks, a key cyclical sector of the stock market—and an industry that is vital to the U.S. and global economies—continue to “underperform” in the old technical parlance, with major components of the S&P 500 machinery sector exhibiting declining price-volume correlations and poor relative strength not only to the market but also to the sector to which they belong—the S&P 500 industrials. Year to date, the S&P 500 machinery sector is up just 8%, compared to the S&P 500 industrials sector, which is up 12%. The S&P 500 itself is up 16%. We remain underweight industrials in general and machinery stocks in particular. And the largest of them all, Caterpillar (CAT), is at a critical juncture and we believe is in danger of breaking down. We are sellers here. Here’s the S&P 500 Machinery Sector, which includes 17 stocks with a combined market capitalization of $764 billion: The 2-panel chart below shows the S&P 500 Machinery Sector hitting new highs over the past 18 months, but also posting a series of relatively low highs relative to the market. Not good. Top panel: S&P 500 Machinery Sector Bottom panel: Machinery’s relative performance compared to the S&P 500 Index The Caterpillar chart below… we’re sellers here. -Carter Braxton Worth To get actionable recommendations via email and live video every night, become a member at worthcharting.com. DISCLOSURE: (None) All opinions expressed by CNBC Pro contributors are solely their own and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent companies or their affiliates and may have been previously disseminated by them on television, radio, the internet or other media. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY. THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND IS NOT INTENDED TO BE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO PURCHASE ANY SECURITIES OR OTHER FINANCIAL ASSETS. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE CONTENT MAY NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISION, YOU SHOULD CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here to view full disclaimer.
