Caterpillar (CAT) is really starting to struggle. It has already fallen considerably since the start of the year. The recent profits warning sent the stock -4% today, and the general latter day market weakness only helped to solidify the declines.
If the global economy is indeed slipping into a secondary deflationary wave (despite the central bank printing), then CAT is going to fall considerably in the weeks and months ahead.
CAT, daily
Summary
It looks like we have a very large multi-month bear flag (pink).
First target is a break of the July low of $78. That seems viable this Autumn.
If $78 fails to hold, then next level is $70, and then the Oct'2011 low of $66.
I would be very surprised if the Oct'2011 low is taken out. However, if it is, it would be a MAJOR warning - along with the ever-weak transportation index, that the US is going to slip into a recession either Q4 2012 or no later than spring 2013.
CAT remains a very good company, and is a real favourite of mine. It makes a real product, that adds real value to the world (arguably, unlike the overhyped iPad!).
For the moment though, CAT looks set for further downside.