Long CAT? Be Careful

Takeaway: The chart below suggests caution is in order for Caterpillar longs.

Long CAT? Be Careful - Cat 789D

 

For CAT longs, the renewed slide in iron ore prices should be a cause for concern. 

 

Recently, iron ore has been a key correlate for the relative performance of shares, as iron ore mine expansions are a major end-market.  We believe CAT and other capital equipment suppliers to resource-related industries are in the midst of a long and significant decline in demand as resource capital spending returns to normal (i.e. not far from depreciation) levels.

 

Long CAT? Be Careful - qqqqq2