3 stocks pulling down the Dow

As the government shutdown continues and the debt ceiling approaches, the most heavily weighted stock in the average is in free fall.

By InvestorPlace Oct 8, 2013 4:30PM

Image: Construction (© Photodisc Green/Getty Images)By Anthony Mirhaydari

 

With the major averages falling through major technical support levels -- the 15,000 mark on the Dow Jones industrials ($INDU) and the 50-day moving average on the Standard & Poor's 500 Index ($INX) -- and no resolution to the fiscal fight in Washington forthcoming, now's the time for traders to start looking for opportunities on the short side.

 

More and more are appearing. Stocks within the S&P 500 are falling out of uptrends at a pace not seen since the market swoons in June and August.


Cyclical, economically-sensitive stocks are rolling over at a pace not seen since June. Capital is flowing into safe haven assets like precious metals and Treasury bonds.

 

Here's a look at three Dow 30 components that look ready to slide lower -- and pull the rest of the market down with them.

 

Caterpillar (CAT)

 Shares are dropping out of a multi-month consolidation pattern going back to April. More dangerously, this pattern is a continuation of a narrowing trading range that started in early 2011. The support line drawn above mirrors the stock's 200-day moving average. Tuesday's breakdown represents the first time CAT has moved below this level since early 2010.

 

In response, I'm adding a short position in CAT to my Edge Letter Sample Portfolio.

 

Chevron (CVX)

 The energy giant is watching as its shares fall below their 200-day moving average for the first time since December as it tests lows set in April, June, and August. Shares are now approaching their 50-week moving average, a level that hasn't been breached since late 2012.

 

International Business Machines (IBM)

 Most importantly, the most heavily weighted stock in the Dow Jones Industrial Average is in free fall. IBM has spent the last two years sliding sideways near $200 a share, which an excursion towards $215 back in March that helped lift the Dow for 10 consecutive days that month.
Now, IBM's outsized influence (due to its high share price and the Dow's price-weighted construction) is working in reverse.

 

How severe is the decline? On a weekly basis, we're looking at the strongest downtrend in IBM since late 2008.

 

That's right. For the most important stock in the most closely followed stock market measure, we're in the midst of a financial-crisis style selloff.

 

More from InvestorPlace

Check out Anthony's new investment newsletter, the Edge, and his money management service, Mirhaydari Capital Management. A two-week free trial has been extended to MSN Money readers. Click the link above to sign up. Mirhaydari can be contacted at anthony@edgeletter.c​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​om​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​ and followed on Twitter at @EdgeLetter. You can view his current stock picks here. Feel free to comment below.

 

 

45Comments
Oct 8, 2013 5:21PM
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3 stocks pulling down the Dow?  More like 3 traders.....Have you looked at the volume at all lately?  Barely 100 million shares traded hands today on the Dow.  Yesterday it was less than 80 million.

Also, is anyone else sick of these friggin Fidelity ads on the right side of the article, the ones that take up half the screen if you happen to roll over them, and start playing an annoying video?  I don't know who the marketing genius was that came up with these pieces of crap, but just to let you know, every time those ads expand, I HATE Fidelity just a little bit more.

Oct 8, 2013 8:24PM
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Obama recommends Yellin as Bernanke's replacement. That's not a good thing. Yellin hasn't given us any indication of ability, she's a yes-person to the guy who "forgot" to consider the impact of metals on his financial atrocity calculations. If I were on the Congressional Panel, I'd simply ask- how do we deal with Wall Street's $632 TRILLION in derivative contracts, when our TRUE GDP doesn't today produce enough revenues to cover the interest at normal rates (not Bargain Bernanke rates)? The markets are a mess. Every bumpkin calls himself a "trader" or "investor" when the last 5+ years have been pumped by fake money. What happens when rates rise without family-sustaining wage jobs floating a REAL economy? Anthony has listed stocks HE thinks are pulling us down. Open your Tech Box and take a look at the Albatrosses in it... Google, Amazon, Facebook, Linked-In and soon to be Twitter... all make money off advertising, not product sales. Button pressing isn't employment. Order fulfilling and boxing up imported crap isn't employment. We owe the countries who own those products and processes- TRILLIONS. How about we collapse all the business platforms here and ship the administration there, recover jobs and factories here and get our economy back firing on all cylinders? 9 days from now it won't matter.  
Oct 8, 2013 10:18PM
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I fear we are in a mess that will not correct easily or in a timely manner.  I wish Romney had won.  He is a nice man at least.  I am so tired of political gotcha lies.
Oct 9, 2013 12:06AM
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Brutus625 Yes the Fidelity ads are disgusting and seems ALL the ADS are getting exponentially more annoying  every day
Oct 8, 2013 8:14PM
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Let's just talk about two camps right now... one looks at the daily losses in the markets as primer for more profits when they buy on the dip. These pathetic losers are likely living sheltered or apart from the daily exposure to crises the rest of us do-- whether in an obscure boondock, a condo in a urban highrise, their mom's basement or as regular people with a vicious greedy dark side. In the other camp are people who once were gainfully employed in a real economy and society- probably living tighter or more meager or worse- toward poverty and destitution. Face it, the stock markets aren't really American, consumer, enterprise or economy-oriented... they are an independent sect that now controls 97% of our actual currency and somewhere close to a quadrillion in monies we have no accessibility to. THAT camp is fully diseased and it is doing more than leaking into camps worldwide. There is NO natural economy and NO natural commerce... it's all pushed, pumped and manufactured by paper and buttons. The markets are chunking downward now-- more a social statement than condition response. If the condition is no economy-- the Dow would be nearly zero today and all those debt instruments would be no more valuable whole than shredded. All things cycle. The cycle we endure actually ended more than 13 years ago. It endures because dead billionaires kept alive solely by our hostage stake- will it so. We can see a future not indentured to the power and political bastions of the 20th Century but we can't get there while markets thrive. They thrive because YOU won't let go of what you "think" is wealth. It's isn't. If it were... we'd have prosperity. You weren't meant to be rich and powerful, you were meant to live fully. That camp is still up and running. Get off your azz and find it. Sell your stock tonight, Leap of Faith... wait 9 more days and that option door closes forever. It has to occur to all WHO holds all that debt paper. It isn't any of us. 
Oct 8, 2013 5:18PM
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I'm pretty sure the sky isn't falling.  All of this turmoil and nonsense make this a buying opportunity for stocks.  I know I've bought a bit.  Nothing wrong with keeping focused and staying on track.  For those folks that are bailing out of the market, you'll regret it later.
Oct 8, 2013 5:42PM
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Today was not a great day, nor even a good one...Didn't really buy anything, maybe a few days more.

 

Yes those ads are annoying.

Oct 8, 2013 9:04PM
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Trader manipulation is killing the market ... and traders are so greedy, they don't realize it.  There was no .. no justification for the Dow diving 160 points today ... except for trader greed!  
Oct 8, 2013 9:01PM
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How about three people pulling down the DOW; John Boehner, Eric Cantor and Ted Cruz?
Oct 9, 2013 2:56AM
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The Government isn't the biggest Threat to America, it's those pesky Global Mega Corporations that are. Corporations and those that run them, fund each and every candidate we now see in Office. Without that funding, those folks couldn't afford to run for Office. Certain Folks spend MILLIONS per Candidate to help them win a post that pays THOUSANDS. Always keep that in mind.

Long before the Debt Ceiling and the Gov't Shutdown, folks have been expecting a major Correction due to slowing earnings growth and rising Rates. Now rates have reversed along with gasoline prices. To counter those two last positives for the Stock Markets, the risk of Default looms. In a Nutshell, it's difficult to determine any Reality to an already heavily Manipulated Bull Run. It's difficult to determine real earnings growth when Companies are engaged in massive Stock Buybacks via Cheap Credit.

We can always assign this or that to why the Markets move higher or lower but we can rarely prove it. You can't rewind the clock and see what the Markets would have done by adding or subtracting different factors. However, in the FACE of an incompetent Government and Big Banks that don't know Real Business from Fake Ones, Old or New, the FEDS will keep Printing to infinity until the whole things Blows Up. For some Americans, it already has.

Oct 9, 2013 9:55AM
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We are in the SH-T   WE AS AMERICANS should CARE  more that MAINSTREET is DYING  and the American worker is dying more so than WALL STREET.The family sustaining jobs are not there they have been shipped out,those are the jobs we need,this COUNTRY needs..THE US is becoming a vast serf /slave labor force run by Oligarchs/Financial Rulers. Is that what kind of country we want??????
Oct 9, 2013 6:48AM
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"I realized after today that we have a threat to our country far greater than any foreign threat or chemical threat in the history of our nation. Our government is our worst threat..."

 

We the People are our government. The THREAT are lobbies, parties, PACs and the other political devices separating We the People from our elected Officials. It's time for stupid people to wake up and recognize what's going on here. The military went back to work without the funds in our Treasury for pay days. Wall Street still functions while our currency is dead. 90 MILLION fellow Americans live suppressed by the lack of family sustaining jobs while non-participants in our economy become game token millionaires. We owe $632 TRILLION in prioritized derivatives contracts. The President doesn't have a thing to do with that-- but YOU do. Everyday you play in the markets, your moves are borrowed because there is NO economy. Get OUT of the markets and MAKE economy now... while you can. EIGHT DAYS.

Oct 8, 2013 9:25PM
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Like it or not, Yellen will make Bernanke look like a hawk. Forget about tapering this year, now that stats are frozen and the shutdown is on. When it ends, stocks will fly to new highs in minutes.
Oct 8, 2013 9:46PM
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Cat's a solid, well managed organization with exceptional leadership.  Regretfully, there will be more downside for the shares thanks to DC ineptitude and abject incompetence, coupled with worldwide financial / political uncertainties.  The folks running this company know what they are doing and have the long term track record to prove it.  Cat's buying back shares at these levels is great for the company and also for shareholders.  If you own it, hold on and be patient.

Near term bad news anticaped - - Ignore it too.  Upcoming sales, inventory, profits, etc. are almost sure to disappoint and may send shares below $80.  Ignore the noise and hysteria and baseless emotions.  Do NOT panic and dump.  In fact, pull the dump lever on the cash truck and grab Cat below $80.....then hang on for solid, delightful, long term capital gains along with wonderful dividends as the construction and mining escalator goes straight back up!
Oct 9, 2013 10:06AM
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Sure aren't many comments about Backhoes on here.
Oct 8, 2013 8:33PM
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I'm not really sure you know much about Janet Yellin....To say she's not a good thing or a good pick, may denote a little ignorance on the part of any group that is opposed to her ability to cope with what she will be presented....I for one hope she does well, is confirmed and goes about the business of the FED in a controlled, but results oriented manner.
Oct 8, 2013 9:04PM
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I realized after today that we have a threat to our country far greater than any foreign threat or chemical threat in the history of our nation. Our government is our worst threat to the people of the United States of America. We need to contact the United Nations, Great Britain, and France and see if they can send in help to defend us against the government. It is a easily identifiable enemy. They are the only stupid idiots walking on US soil. They should if caught be shot for treason against America and the world. Iraq, Syria, Iran all has more sense than these idiots.
Oct 8, 2013 9:18PM
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It's time to put all Democrats in Concentration camps!

 

We need to isolate them and control their breeding... or these genetic mistake will destroy America!

Oct 8, 2013 7:52PM
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LMAO. This sniveling piece of Dung for a President is a lying hypocrite! Everything this **** said today about the Republicans is the same he's doing to America! He needs to put on his big girl panties and cut the union plan  killing jobs and his stupid healthcare bill that  killing 99% of the taxpayer. These idiots say it's so greats as their getting all over. Not one of them can answer how many have signed up! That means it's crashing and as usual they don't want us to know! But he said, you can keep your same doctor, your plan will not go up and no new taxes if you make less than 250k , Oh and I'll cut the deficit in 3 years... When dose the lying stop?  Who voted for this idiot? Oh, and Bushes debt was un American he said... Now he's tripled it, and he' wants more...Socialist **** that he is and those who stand behind him!
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