Dump these 3 blue-chip stocks

The Dow's recent drop will nag investors this week as the euphoria holding the market up this summer looks set to fade.

By InvestorPlace Jul 28, 2014 11:46AM

Credit: © Jessica Rinaldi/Reuters
Caption: The CAT logo is seen on the side of a Caterpillar machineBy Anthony Mirhaydari


The stock market's apparent invulnerability came to an end on Friday -- ending an 11-day winning streak for the Dow Jones Industrial Average ($INDU) closing higher at the end of the week.


That's representative of just how complacent investors had become, since bidding stocks up ahead of the weekend is a vote of confidence. That's especially true in the context of all the geopolitical tension in Ukraine, Gaza and elsewhere.


As a result, the Dow index of blue-chip stocks closed below its 20-day moving average in a meaningful way for the first time since May, dropping below the 17,000 level in the process. Small caps suffered more, testing back down to their 200-day moving average.


But it's the drop in the Dow that will be nagging investors this week as the euphoria that's held the market up this summer looks set to fade.


Buying demand is narrowing. You can see this in the way measures of market breadth have been compressing: The percentage of NYSE stocks above their 50-day moving average has dropped to around 60 percent from a peak of more than 83 percent at the start of July.


Just focusing on the 30 components of the Dow Jones Industrial Average tells the story. A growing number of blue-chip stocks on the list are rolling over.


Here's a look at three that are in trouble:


American Express

American Express (AXP) has sliced below its 50-day moving average for the first time since May, breaking out of a tight two-month trading range. The company will report results after the close on July 29, but it looks like investors are preparing for disappointment as recent retail sales data shows U.S. consumers have been holding back on spending lately.


Analysts at Macquarie initiated coverage on AXP stock on July 10 with an "underperform" rating.


Caterpillar

Like Boeing, Caterpillar (CAT) has been another consistent performer for the Dow Jones recently, rising in a near-perfect 45-degree angle from late 2013 to test what is now triple-top resistance near $110 a share. The selloff was prompted by weaker-than-expected Q2 revenues and weak fiscal 2014 earnings guidance (on a slowdown in Chinese construction).

Not even the announcement that CAT plans on buying back $2.5 billion worth of shares -- part of a financial engineering strategy that's been like catnip to investors lately -- could offset the disappointment.


United Technologies

United Technologies (UTX) stock, a industrial sector stalwart, acted like someone clubbed it over the head last week as it collapsed through its 200-day moving average for the first time since November 2012. That's a massive trend break in a sober, mature, heavy-hitting stock.


The last time UTX suffered a breakdown like this after a period of low volatility was in July 2011 -- ahead of what's been the worst broad-market selloff of the bull market to date.


You can read about two more blue-chip stocks to sell here.


More from InvestorPlace

Anthony Mirhaydari is the founder of the Edge and Edge Pro investment advisory newsletters, as well as of Mirhaydari Capital Management, a registered investment advisory firm. As of this writing, he had recommended put options against GE to his clients.

Tags: AXPCATUTX
17Comments
Jul 28, 2014 12:56PM
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Sure bet to buy these stocks, Tony has been wrong so often it hurts
Jul 28, 2014 1:05PM
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CAT is in my sites for after the fall.
Jul 28, 2014 4:13PM
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Anthony identified the market peak as January 2013.   Missed it by THAT much.
Jul 28, 2014 3:41PM
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Most dump these stocks now articles are excellent contrarian indicators. These guys are writers not investors but they know people are curious when someone touts a must sell. Barron's did the same thing on Tesla when it was $100. Skeptics have been predicting the demise of the railroads for about two years now because of decreasing coal demand. Just about all of the rails never flinched...
Jul 29, 2014 1:59AM
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Report released yesterday caused China stocks to skyrocket again. Chinese economy has stabilized and is taking off and they will need CAT products to continue their infrastructure building program. Tony Mirhaydari is one of the most shameless losers ever seen on this blog. I'm surprised I have  not seen him on America's Most Wanted running and hiding from all of his clients who have surely lost a fortune as he repeatedly urged them into bonds as the stock market surged over 300 percent with Obama. Tony, stop trying to predict a market top, you suck at it. We will roar until the day before Obama leaves office, God bless his name.
Jul 29, 2014 11:43AM
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As always we call it as we see it folks.....All in the red now...The call came at 1050 hrs and manipulators pretty much in control throughout....Earnings were good, consumer confidence was good but, like we always tell you, people move markets, not news so, since scumbags are in control, down we go...And please do not blame it on Russia, we were already dropping, if you think this is because of Russia you are in the wrong business...Will be a tough afternoon apparently....More later.
Jul 29, 2014 10:56AM
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At 1050 hrs they started to take over, slowly but surely you will noticed all indexes starting to drop....Like we said earlier, be cautious, crooks are here to stay and to try to bring us down big, that is how they make their money...Hopefully we will hang on....Easier said than done...More later.
Jul 28, 2014 7:29PM
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Never mind the fools posting arrogance like they know anything. Each time someone called the bottom in the past, it got bailed by fake Fed money. We are quickly running out of that now and the stocks most people are in are truly dead. America has to do something about the stupid arrogant fools running these platforms, they have ruined us.
Jul 28, 2014 4:20PM
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Each of these stocks should make lower highs in the next 90 days.  The broad market has one more leg higher left.  Then it will be time dump all stocks come the last week of October with QE3 ending and the Fed getting closer to hiking interest rates. The October 28th-29th FOMC meeting could mark the top and begin the downtrend or at least a major stock market correction going into 2015.
Jul 29, 2014 2:02AM
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TONY MIRHAYDARI is a criminal who tries to sink the market for profit using this blog. SEC, where are you????
Jul 28, 2014 2:35PM
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Yes, Thank you, and please provide the Piotroski scores and Altman-Zs too. I wouldn't assume you are limiting yourself to the technical naturally.
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